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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________.
Commission file number 001-13183
ROBERTS REALTY INVESTORS, INC.
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(Name of small business issuer in its charter)
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GEORGIA 58-2122873
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
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8010 ROSWELL ROAD, SUITE 120
ATLANTA, GA 30350
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (770) 394-6000
Securities registered under Section 12(b) of the Act: NONE
Title of each class: Name of each exchange on which registered:
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N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the common equity was sold, or the average bid and asked
prices of such common equity, as of a specified date within 60 days prior to
the date of this filing. (See definition of affiliate in Rule 405.)
$24,727,024
Note: If a determination as to whether a particular person or entity
is an affiliate cannot be made without involving unreasonable effort and
expense, the aggregate market value of the common stock held by non-affiliates
may be calculated on the basis of assumptions reasonable under the
circumstances, provided that the assumptions are set forth in this Form.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 4,840,075 shares of
common stock (as of March 1, 2000)
Documents Incorporated by Reference.
Portions of the proxy statement for the registrant's 2000 annual
meeting of shareholders are incorporated by reference in Part III of this Form
10-K.
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TABLE OF CONTENTS
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PART I............................................................................................... 2
ITEM 1. BUSINESS....................................................................... 2
ITEM 2. PROPERTIES..................................................................... 9
ITEM 3. LEGAL PROCEEDINGS.............................................................. 22
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................................... 22
PART II.............................................................................................. 23
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.................................................... 23
ITEM 6. SELECTED FINANCIAL DATA........................................................ 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.............................................................. 39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................... 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE..................................................................... 40
PART III............................................................................................. 40
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT ............................................. 40
ITEM 11. EXECUTIVE COMPENSATION......................................................... 40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.......................................................... 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................................................... 40
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K........................................................ 41
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Roberts Realty Investors, Inc. owns and operates multifamily
residential properties as a self-administered, self-managed equity real estate
investment trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. The
operating partnership owns all our properties. As of March 1, 2000, Roberts
Realty owns a 65.4% interest in the operating partnership and is its sole
general partner. We expect to continue to conduct our business in this
organizational structure, which is sometimes called an "umbrella partnership"
or "UPREIT."
As of March 24, 2000 we own nine existing multifamily apartment
communities containing a total of 1,779 apartment homes, and three communities
under development or construction that will contain approximately 853 apartment
homes. Eight of our communities - River Oaks, Rosewood Plantation, Plantation
Trace, Preston Oaks, Highland Park, Crestmark, Ivey Brook, and Bradford Creek -
containing a total of 1,661 apartment units, are stabilized. Our 118-unit first
phase of Addison Place, formerly referred to as Abbotts Bridge, is now in its
initial lease-up phase. Addison Place's second phase, anticipated to total 285
apartment homes, and Ballantyne, anticipated to total 319 apartment homes, are
under construction. Our Old Norcross community, anticipated to total 249
apartment homes, is in the development stage. All of our communities are
located in metropolitan Atlanta, Georgia, except the Ballantyne community,
which is located in Charlotte, North Carolina.
We consider a community to have achieved stabilized occupancy on the
earlier of (a) attainment of 95% occupancy as of the first day of any month, or
(b) one year after completion of construction. As of December 31, 1999, we
owned eight stabilized communities containing a total of 1,661 apartment homes
that had a physical occupancy rate of 92.6%.
Roberts Realty is a Georgia corporation formed in July 1994. We expect
to continue to qualify as a REIT for federal income tax purposes. A REIT is a
legal entity that holds real estate interests and, through its payment of
distributions, is able to reduce or avoid incurring federal income tax at the
corporate level. This structure allows shareholders to participate in real
estate investments without the "double taxation" of income i.e., at both the
corporate and shareholder levels - that generally results from an investment in
shares of a corporation. To maintain our qualification as a REIT, we must,
among other things, distribute annually to our shareholders at least 95% of our
taxable income. Our common stock is traded on the American Stock Exchange under
the symbol "RPI."
We have engaged two entities owned by Mr. Charles S. Roberts, our
Chairman of the Board, Chief Executive Officer and President, to perform
services for the operating partnership. These entities are Roberts Properties,
Inc. and Roberts Properties Construction, Inc., which we sometimes refer to as
the Roberts Companies. The Roberts Companies developed and constructed each of
our nine existing communities, except the 24-unit second phase of Preston Oaks,
which was constructed by an independent contractor. We expect that affiliates
of Mr. Roberts will continue to develop future properties and construct
properties where feasible. Roberts Construction started construction of the
Ballantyne Community and intends to hire an independent general contractor
to complete construction of the community. Roberts Construction will continue
to oversee the project.
Our executive offices are located at 8010 Roswell Road, Suite 120,
Atlanta, Georgia 30350, and our telephone number is (770) 394-6000. As of March
20, 2000, we have 47 full-time employees.
THE OPERATING PARTNERSHIP
We conduct our business and own all of our real estate assets through
the operating partnership. We control the operating partnership as its sole
general partner. Our ownership interest in the operating partnership entitles
us to share in cash distributions from, and in the profits and losses of, the
operating partnership generally in proportion to our ownership percentage. In
this report we refer to units of limited partnership interest in the operating
partnership as "units." The holders of units are: former limited partners in
the limited partnerships that were merged into the operating partnership; Mr.
Roberts; and the former owner of one of the retail centers we formerly owned.
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Except as described in the following paragraph, holders of units in
the operating partnership, sometimes referred to in this report as unitholders,
generally have the right to require the operating partnership to redeem their
units. A unitholder who submits units for redemption will receive, at our
election, either an equal number of shares or cash in the amount of the average
of the daily market prices of the common stock for the 10 consecutive trading
days before the date of submission multiplied by the number of units submitted.
We have adopted a policy of acquiring units in exchange for shares. We also
have the right, at our election, to issue shares in exchange for all
outstanding units. Our articles of incorporation limit ownership by any one
holder to 6% of the outstanding shares of our common stock, par value $0.01 per
share, other than by Mr. Roberts, who is limited to 25%. As a result,
unitholders cannot redeem their units if doing so would violate those ownership
limits.
On February 1, 1999, we began a six-month period in which units could
not be redeemed. At the end of the six-month period, we registered new shares
with the SEC that simplified the process for unitholders who elect to exchange
their units for shares. We completed the registration of these new shares with
the SEC on August 2, 1999. Unlike the shares issued in exchange for units
before February 1, 1999 in reliance upon the "intrastate" offering exemption,
shares issued under the new registration (a) are freely tradeable, other than
by affiliates, and (b) can be issued both to persons who reside in Georgia and
in other states. Before February 1, 1999, we paid cash to redeeming unitholders
who resided outside the state of Georgia.
Whenever we issue shares, we are obligated to contribute the net
proceeds from that issuance to the operating partnership, and the operating
partnership is obligated to issue the same number of units to us. The operating
partnership agreement permits the operating partnership, without the consent of
the unitholders, to sell additional units and add limited partners.
GROWTH STRATEGIES
Our business plan and growth strategy are focused on creating cash
flow and capital appreciation by building and managing new apartment homes of
the highest quality and value in excellent high-growth neighborhoods. Our
business objectives are:
- to maximize the current return to our shareholders in the
form of quarterly dividends through increases in cash flow,
and
- to increase long-term total returns to our shareholders
through appreciation in the value of the common stock.
To achieve these objectives, we intend to pursue the following growth
strategies:
(a) maximize cash flow from operations by seeking through
intensive management to maintain high occupancy levels,
obtain regular rent increases, manage resident turnover
efficiently and control operating expenses; and
(b) develop new multifamily apartment communities in metropolitan
Atlanta, North Carolina, Florida and other parts of the
Southeast.
We will engage others, including the Roberts Companies, to help us pursue these
strategies, which are described in more detail below.
Property Management Strategy. We believe that managing our communities
intensively is a fundamental element of our growth strategy. As of March 20,
2000, we employ 46 property management personnel, including property managers,
leasing managers, leasing consultants, maintenance supervisors and technicians,
and accounting personnel. We believe our property management expertise will
enable us to continue to deliver quality services, thereby promoting resident
satisfaction, maintaining high resident retention, and enhancing the value of
each of the communities. Our property management strategy will continue to be:
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- to increase the average occupancy and rental rates as market
conditions permit,
- to minimize resident turnover and delinquent rental
payments through strict review of each applicant's
creditworthiness, and
- to control operating expenses to increase net operating
income at each of the communities.
Development Strategy. We intend to continue to develop high quality
apartment communities for long-term ownership. During the past 15 years, the
Roberts Companies have developed, constructed and/or managed over 4,200
residential units. We believe that the number and quality of the apartment
units developed by the Roberts Companies, the relationships Mr. Roberts and
employees of the Roberts Companies have developed with local permitting and
governmental authorities, and the Roberts Companies' experience with the
development, construction and financing process will minimize the barriers to
new development often faced by less experienced developers and national
developers attempting to enter the Atlanta market. These barriers include
governmental growth control; a difficult rezoning and permitting process; and
the limited availability of well-located sites. We believe that these
restraints on construction, coupled with the predicted continued growth in
population, job growth and household formations, present an excellent
opportunity for us to achieve favorable returns on the development of
well-located, high quality apartment home communities.
Roberts Properties is developing the Addison Place, Ballantyne and Old
Norcross communities. We expect that Roberts Properties will continue to
develop communities for us in the future. Although the experience of the
Roberts Companies will be most helpful to us in the Atlanta area, we believe
that experience will enable us to develop multifamily apartment communities in
other areas in the Southeast, including Charlotte.
Although we presently intend to engage the Roberts Companies in our
development and construction activities, we may hire other development or
construction companies in Atlanta and elsewhere if we deem it to be in our best
interests to do so. The most likely development scenario for the operating
partnership is for it to acquire properties already under development from
Roberts Properties and/or an entity formed by Mr. Roberts or his affiliates. We
may engage the Roberts Companies to develop properties on a fee basis; we may
enter into joint venture agreements with the Roberts Companies; or we may
acquire communities developed by the Roberts Companies and owned by other
affiliates of Mr. Roberts. We may also enter into similar arrangements with
others who are independent of Mr. Roberts.
In analyzing the potential development of a particular community, we
will evaluate geographic, demographic, economic and financial data, including:
- household, population and employment growth;
- prevailing rental and occupancy rates in the immediate market
area and the perceived potential for growth in those rates;
- costs that affect profitability of the investment, including
construction, financing, operating and maintenance costs;
- income levels in the area;
- existing employment bases;
- traffic volume, transportation access, proximity to
commercial centers and regional malls; and
- proximity to and quality of the area's schools.
We will also consider physical elements regarding a particular site, including
the probability of zoning approval (if required), availability of utilities and
infrastructure, and other physical characteristics of the site.
For information regarding the development and construction of Addison
Place, Ballantyne, and Old Norcross, see Part I, Item 2, Description of
Property.
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ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state and local laws and regulations, an owner
of real estate is liable for the costs of removal or remediation of hazardous
or toxic substances on the property. Those laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
the hazardous or toxic substances. The costs of remediation or removal of the
substances may be substantial, and the presence of the substances, or the
failure to promptly remediate the substances, may adversely affect the owner's
ability to sell the real estate or to borrow using the real estate as
collateral. In connection with its ownership and operation of the communities
and its other real estate assets, the operating partnership may be potentially
liable for:
(a) those remediation and removal costs, and
(b) damages to persons or property arising from the existence or
maintenance of those hazardous or toxic substances.
We have conducted preliminary evaluations of the environmental
condition of our communities and surrounding properties.
In April 1998, Wallace Enterprises, Inc., an adjacent land owner,
notified us that a petroleum product release had been discovered on property
adjacent to our Crestmark community. Wallace repaired the source of the release
and its corrective action plan has been approved by the Georgia Environmental
Protection Division, or EPD. Our environmental attorneys and consultants have
advised us that Wallace is responsible for cleaning up the release to the
extent required by the EPD regulations. Our environmental consultants have
informed us that despite a possible groundwater impact at Crestmark, no threat
to human health or safety is suggested. We and our environmental consultants
are monitoring the EPD files to ensure Wallace's compliance with the EPD
regulations.
The preliminary environmental assessments of our other communities and
other real estate assets have not revealed any environmental liability that we
believe would have a material adverse effect on our business, assets, or
results of operations, nor are we aware of any liability of that type.
Nevertheless, these assessments may not have revealed all environmental
liabilities, and we may have material environmental liabilities that we do not
know about. Future uses or conditions - including changes in applicable
environmental laws and regulations - may cause us to have environmental
liability.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS
Under the American with Disabilities Act of 1990, or the ADA, all
places of public accommodation are required to meet federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Although we believe that the communities are substantially
in compliance with present requirements of the ADA, we may incur additional
costs of complying with the ADA. A number of additional federal, state and
local laws may also require modifications to the communities, or restrict
further renovations to them, with respect to access by disabled persons. For
example, the Fair Housing Amendments Act of 1988 requires apartment communities
first occupied after March 13, 1990 to be accessible to the handicapped.
Noncompliance with this Act could result in the imposition of fines or an award
of damages to private litigants. We believe that the communities that are
subject to the Act comply with that law.
Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. We cannot estimate the
ultimate amount of the cost of compliance with the ADA or that legislation,
and, while those costs are not expected to have a material adverse effect on
us, those costs could be substantial. Limitations or restrictions on the
completion of renovations may limit application of our investment strategy in
some instances or reduce overall returns on our investments.
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INSURANCE
We carry comprehensive general liability, fire, extended coverage and
rental loss insurance on all of our existing communities, with policy
specifications, insured limits and deductibles customarily carried for similar
properties. We carry similar insurance with respect to our properties under
development or properties under construction, but with appropriate exceptions
given the nature of these properties. We believe that our communities are
adequately covered by insurance. There are, however, some types of losses (such
as losses arising from acts of war) that are not generally insured because they
are either uninsurable or not economically insurable. If an uninsured loss or a
loss in excess of insured limits occurs, we could lose our capital invested in
a property, as well as the anticipated future revenues from the property, and
would continue to be obligated on any mortgage indebtedness or other
obligations related to the property. Any loss of that kind would adversely
affect us.
INVESTMENT, FINANCING AND CONFLICT OF INTEREST POLICIES
The investment policies, financing policies and conflict of interest
policies set by our board of directors are summarized below. Our board may
amend or revise them from time to time without a vote of our shareholders or
any vote of the partners of the operating partnership, except that:
(a) we cannot change our policy of holding our assets and
conducting our business exclusively through the operating
partnership without amending the operating partnership
agreement, which will generally require the consent of the
holders of a majority in interest of the limited partners in
the operating partnership including, if applicable, Roberts
Realty, and
(b) changes in our conflicts of interest policies must be
approved by a majority of the independent directors and
otherwise be consistent with legal requirements.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. We conduct all
of our investment activities through the operating partnership and will do so
for so long as the operating partnership exists. (The agreement of limited
partnership of the operating partnership provides that it is not required to be
dissolved until 2093.) Our investment objectives are to achieve stable cash
flow available for distributions and, over time, to increase cash flow and
portfolio value by continuing to develop multifamily apartment communities for
long-term ownership.
Our policy is to develop assets where we believe that favorable investment
opportunities exist based on market conditions at the time of the investment.
We expect to pursue our investment objectives primarily through the
direct ownership of properties by the operating partnership, although, as
discussed below, we may also pursue indirect property ownership opportunities.
We intend to develop multifamily apartment communities primarily in the Atlanta
and Charlotte metropolitan areas, Florida, and other parts of the Southeast.
Future development or investment activities will not be limited by our
governing documents to any geographic area, product type or specified
percentage of our assets.
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Possible Acquisition of Communities Developed by Mr. Roberts or his
Affiliates. Mr. Roberts and Roberts Properties have been engaged in the
development of residential and commercial real estate since the early 1970s,
and Mr. Roberts expects that he and Roberts Properties will continue to engage
in real estate development. Provided that any transaction or agreement must
comply with the policies discussed under "Conflict of Interest Policies," we
and/or the operating partnership may engage in transactions of various types
with Mr. Roberts, Roberts Properties and/or other affiliates of Mr. Roberts to
develop or acquire real estate. Those transactions may include:
- hiring Mr. Roberts or Roberts Properties to develop real
estate under a fee arrangement,
- acquiring undeveloped property from Mr. Roberts or his
affiliates for future development, or
- acquiring from Mr. Roberts or his affiliates partially or
completely constructed properties, whether in their lease-up
phase or already leased-up.
No particular arrangements have been determined, other than the communities now
under construction and development as described elsewhere in this report.
Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. We and the operating partnership also may invest
in securities of other entities engaged in real estate activities or invest in
securities of other issuers, including investments by us and the operating
partnership for the purpose of exercising control over those entities. We or
the operating partnership may acquire all or substantially all of the
securities or assets of other REITs or similar entities where those investments
would be consistent with our investment policies. We do not currently intend to
invest in the securities of other issuers. In making any of the investments
described in this paragraph we intend to comply with the percentage of
ownership limitations and gross income tests necessary for REIT qualification
under the Internal Revenue Code. Also, we will not make any investments if the
proposed investment would cause us or the operating partnership to be an
"investment company" under the Investment Company Act of 1940.
No Investments in Mortgages. We do not own any mortgages and do not
currently intend to invest in mortgages or to engage in originating, servicing,
or warehousing mortgages.
FINANCING POLICIES
Our organizational documents do not limit the amount of indebtedness
we may incur. We have an informal policy that we will not incur indebtedness in
excess of 75% of what the board of directors believes is the fair market value
of our assets at any given time. We may, however, from time to time re-evaluate
our borrowing policies in light of then current economic conditions, relative
costs of debt and equity capital, market value of the operating partnership's
real estate assets, growth and acquisition opportunities and other factors.
Modification of this policy may adversely affect the interests of our
shareholders.
To the extent that the board of directors determines to seek
additional capital, we may raise capital through additional equity offerings,
debt financing or retention of cash flow, or a combination of these methods.
Our retention of cash flow is subject to provisions in the Internal Revenue
Code requiring a REIT to distribute a specified percentage of taxable income,
and we must also take into account taxes that would be imposed on undistributed
taxable income. As long as the operating partnership is in existence, we will
contribute the net proceeds of all equity capital we raise to the operating
partnership in exchange for units or other interests in the operating
partnership.
We have not established any limit on the number or amount of mortgages
on any single property or on the operating partnership's portfolio as a whole.
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CONFLICT OF INTEREST POLICIES
The board of directors is subject to provisions of Georgia law that
are designed to eliminate or minimize potential conflicts of interest. We can
give no assurances, however, that these policies will always eliminate the
influence of those conflicts. If these policies are not successful, the board
could make decisions that might fail to reflect fully the interests of all
shareholders.
Under Georgia law, a director may not misappropriate corporate
opportunities that he learns of solely by serving as a member of the board of
directors. In addition, under Georgia law, a transaction effected by us or any
entity we control (including the operating partnership) in which a director, or
specified related persons and entities of the director, have a conflicting
interest of such financial significance that it would reasonably be expected to
exert an influence on the director's judgment may not be enjoined, set aside or
give rise to damages on the grounds of that interest if either:
- the transaction is approved, after disclosure of the
interest, by the affirmative vote of a majority of the
disinterested directors, or by the affirmative vote of a
majority of the votes cast by disinterested shareholders, or
- the transaction is established to have been fair to us.
The board of directors has adopted a policy that all conflicting interest
transactions must be authorized by a majority of the disinterested directors,
but only if there are at least two directors who are disinterested with respect
to the matter at issue.
OTHER POLICIES
We and the operating partnership have authority to offer our
securities and to repurchase and otherwise reacquire our securities, and we may
engage in those activities in the future. We have adopted a policy that we will
issue shares to unitholders who exercise their rights of redemption. In the
future, we may make loans to joint ventures in which we participate to meet
working capital needs. We have not engaged in trading, underwriting, agency
distribution, or sale of securities of other issuers, and we do not intend to
do so. We intend to make investments in a manner so that we will not be treated
as an investment company under the Investment Company Act of 1940.
We announced our intention to repurchase up to 300,000 shares of our
outstanding common stock on September 3, 1998. We repurchased 121,200 shares in
1999 for $909,000 and 19,300 shares in 1998 for $145,000. During 1999, we paid
$28,000 to redeem 3,917 units from unitholders who resided outside the state of
Georgia.
At all times, we intend to make investments in a manner to be
consistent with the requirements of the Internal Revenue Code for us to qualify
as a REIT unless, because of changing circumstances or changes in the Internal
Revenue Code or in applicable regulations, the board of directors decides that
it is no longer in our best interests to qualify as a REIT.
For a description of the competition we face, see Part 1, Item 2,
Description of Property - Competition.
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ITEM 2. DESCRIPTION OF PROPERTY.
GENERAL
As of March 24, 2000 we own nine existing multifamily apartment
communities containing a total of 1,779 apartment homes, and three communities
under development or construction that will contain approximately 853 apartment
homes. Eight of our existing communities - River Oaks, Rosewood Plantation,
Plantation Trace, Preston Oaks, Highland Park, Crestmark, Ivey Brook, and
Bradford Creek - containing a total of 1,661 apartment units, are stabilized.
Our 118-unit first phase of Addison Place, formerly referred to as Abbotts
Bridge, is now in its initial lease-up phase. Addison Place's second phase,
totaling 285 apartment homes and Ballantyne, totaling 319 apartment homes, are
under construction. Our Old Norcross community, anticipated to total 249
apartment homes, is in the development stage. All of our communities are
located in metropolitan Atlanta, Georgia, except the Ballantyne community,
which is located in Charlotte, North Carolina.
As of December 31, 1999, we owned eight stabilized communities
containing a total of 1,661 apartment homes that had a physical occupancy rate
of 92.6%. We sold the 118-unit Bentley Place community on August 23, 1999.
We believe that the demand for multifamily housing in Atlanta will
increase due to Atlanta's growing population. According to the Atlanta Regional
Commission, which we refer to as the ARC, both population and job growth in
Atlanta are projected to be above the national average for the foreseeable
future. The ARC is the regional planning and governmental coordination agency
for the 10-county Atlanta Region, which is comprised of Fulton, Dekalb,
Gwinnett, Cobb, Clayton, Rockdale, Henry, Douglas, Cherokee, and Fayette
counties.
The following information is based on statistical estimates published
by the ARC. The population of the Atlanta Region is projected to grow 40.9% for
the period from 1990 to 2010, from 2,557,800 persons in 1990 to 3,603,800
persons in 2010. The estimated population of the Atlanta Region increased by
25.3% from 2,557,800 persons in 1990 to 3,204,900 persons in 1999, making it
one of the largest metropolitan areas in the country and the largest in the
Southeast.
Employment of the Atlanta Region is projected to grow 52.5% for the
period from 1990 to 2010, from 1,426,000 jobs in 1990 to 2,175,000 jobs in
2010. Estimated employment of the Atlanta Region increased by 29.0% from
1,426,000 jobs in 1990 to 1,840,000 jobs in 1998. According to the Georgia
Department of Labor, the estimated December 1999 unemployment rate of the
Atlanta Region was 2.6%, which was below the estimated December 1999 Georgia
unemployment rate of 3.2% and the estimated December 1999 U.S. unemployment
rate of 3.7%.
Housing units in the Atlanta Region increased an estimated 25.9%, from
1,052,430 units in 1990 to 1,324,511 units in 1999. Multifamily homes in the
Atlanta Region increased 17.1% from 342,441 units in 1990 to 400,973 units in
1999.
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The following table summarizes basic information about our
communities.
THE COMMUNITIES
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December 1999
Year Average Rental Rates Average Physical
Completed Number Approximate Average -------------------- Occupancy for the
or to be of Rentable Area Unit Size Per Square 12 Months Ended
Community Location Completed Units (Square Feet) (Square Feet) Per Unit Foot Dec. 31, 1999
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Existing Communities:
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Plantation Trace(1) Atlanta 1990/1998 232 310,956 1,340 $ 974 $ 0.73 89.7%
River Oaks Atlanta 1992 216 276,046 1,278 940 0.74 92.7
Crestmark(2) Atlanta 1993/1997 334 360,284 1,079 830 0.77 94.9
Rosewood Plantation Atlanta 1994 152 192,352 1,265 960 0.76 97.1
Preston Oaks(3) Atlanta 1995/1998 213 257,180 1,207 1,021 0.85 97.8
Highland Park Atlanta 1995 188 231,634 1,232 967 0.79 97.0
Ivey Brook Atlanta 1997 146 197,028 1,350 1,032 0.76 96.6
Bradford Creek Atlanta 1998 180 243,941 1,355 968 0.71 92.5
Addison Place
Phase I Atlanta 1999 118 200,194 1,697 $1,313 $ 0.77 N/A (4)
----- ---------
Subtotal/Average 1,779 2,269,615 1,276
===== ========= =====
Communities Under
- -----------------
Construction:
- -------------
Addison Place
Phase II Atlanta 2001 285 403,312 1,415 N/A N/A N/A
Ballantyne Charlotte 2001 319 413,528 1,296 N/A N/A N/A
Subtotal/Average 604
=====
Communities Under
- -----------------
Development (5):
- ----------------
Old Norcross Atlanta 2001 249 (5) (5) N/A N/A N/A
</TABLE>
(1) Plantation Trace was completed in 2 phases. The 182-unit first phase was
completed in 1990 and the 50-unit second phase was completed in 1998.
(2) Crestmark was completed in 2 phases. The 248-unit first phase was
completed in 1993 and the 86-unit second phase was completed in 1997.
(3) Preston Oaks was completed in 2 phases. The 189-unit first phase was
completed in 1995 and the 24-unit second phase was completed in 1998.
(4) The 118-unit first phase of Addison Place was in its lease-up phase at
December 31, 1999, and its 12-month historical occupancy percentage is not
comparable.
(5) Because this community is still in the development stage, the date of
completion and exact number of units are estimates and are subject to
change, and the square footage information is not available.
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<PAGE> 12
Annual operating data regarding our stabilized communities at December
31, 1999 are summarized in the following table (with the second phases of
Crestmark, Preston Oaks and Plantation Trace described separately for this
purpose and Windsong and Bentley Place omitted due to their sales in January
1998 and August 1999, respectively). Except for those figures noted with an
asterisk, the occupancy rates shown represent the average physical occupancy of
the applicable community calculated by dividing the total number of vacant days
by the total possible number of vacant days for each year and then subtracting
the resulting number from 100%. The figures noted with asterisks reflect the
applicable data on December 31 of the specified year and are not annualized,
because the applicable community was under construction and in its initial
lease-up period during at least a portion of that year. During lease-up, units
are leased as they are constructed and made ready for occupancy building by
building, thus annualization of data is not possible during that period.
Throughout this table, "N/A" means "not applicable," i.e., no unit in the
community was available to be occupied during the relevant year. Footnotes are
on the following page.
<TABLE>
<CAPTION>
Physical Occupancy Rate
-----------------------
Month
Completed
Initial
Community Leaseup 1995 1996 1997 1998 1999
--------- --------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Plantation 9/90 98% 99% 93% 94% 90%
Trace
Plantation 11/98 N/A N/A N/A 92%* N/A
Trace
Phase II(1)
River Oaks 2/93 99% 98% 96% 98% 93%
Rosewood 5/94 99% 99% 97% 97% 97%
Plantation
Preston Oaks 8/95 100%* 99% 97% 98% 98%
Highland Park 3/96 68% 96%* 96% 97% 97%
Crestmark 4/94 99% 98% 87% 91% 95%
Crestmark 9/97 N/A N/A 96%* N/A N/A
Phase II(2)
Ivey Brook 8/97 N/A 27%* 98%* 97% 97%
Preston Oaks 7/98 N/A N/A N/A 100%* N/A
Phase II(1)
Bradford 8/98 N/A N/A N/A 94%* 93%
Creek(3)
<CAPTION>
Average Effective Annual Rental Rates
-------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
Per Per Per Per Per Per Per Per Per Per
Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft.
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plantation $ 786 $ 0.62 $ 821 $ 0.65 $ 867 $ 0.69 $ 867 $ 0.69 $ 956 $0.71
Trace
Plantation N/A N/A N/A N/A $1,171* $ 0.72* $1,171* $ 0.72* N/A N/A
Trace
Phase II(1)
River Oaks $ 820 $ 0.64 $ 859 $ 0.67 $ 910 $ 0.71 $ 910 $ 0.71 $ 930 $0.73
Rosewood $ 814 $ 0.64 $ 858 $ 0.68 $ 917 $ 0.72 $ 917 $ 0.72 $ 946 $0.75
Plantation
Preston Oaks $ 885 $ 0.71* $ 892 $ 0.72 $ 981 $ 0.79 $ 981 $ 0.79 $ 994 $0.82
Highland Park $ 819* $ 0.67* $ 805 $ 0.65 $ 920 $ 0.75 $ 920 $ 0.75 $ 950 $0.77
Crestmark $ 688 $ 0.67 $ 736 $ 0.72 $ 787 $ 0.73 $ 787 $ 0.73 $ 807 $0.75
Crestmark N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Phase II(2)
Ivey Brook N/A N/A $ 925* $ 0.69* $ 979 $ 0.73 $ 979 $ 0.73 $1,014 $0.75
Preston Oaks N/A N/A N/A N/A $ 799* $ 0.83* $ 799* $ 0.83* N/A N/A
Phase II(1)
Bradford N/A N/A N/A N/A $ 926* $ 0.68* $ 926* $ 0.68* $ 949 $0.70
Creek(3)
</TABLE>
- ---------------
(1) Plantation Trace Phase II completed its lease-up phase in November 1998
and Preston Oaks Phase II completed its lease-up in August 1998. Beginning
with 1999, both phases of Plantation Trace and Preston Oaks are combined.
(2) We acquired Crestmark in June 1996. Phase II of Crestmark completed its
lease-up in September 1997. Beginning with 1998, both phases of Crestmark
are combined.
(3) Bradford Creek completed its lease-up in August 1998.
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<PAGE> 13
As described below, our Atlanta communities are located in Gwinnett,
Fulton and Douglas Counties and six submarkets, or geographic areas, within
these counties. We also have one community in Charlotte. The Ballantyne
community now under construction in Charlotte is described after the Georgia
properties. Each heading identifies the community or communities within the
specified county and submarket. We obtained population and employment data for
each Atlanta submarket from the ARC. Multiple communities are located in each
of the Duluth, Peachtree Corners and Perimeter Center/North Springs submarkets;
thus those communities compete not only with unaffiliated apartment communities
but also with each other. Please see "Summary of Debt Secured by the
Communities," which follows the description of the individual communities, for
an explanation of the terms of our secured indebtedness.
GWINNETT COUNTY
Gwinnett County was one of the fastest growing counties in the U.S.
in the 1980's, and from 1985 until 1990 it ranked first in the nation in growth
among counties with a population of more than 100,000. Since 1990, Gwinnett's
population has increased 47% to a current level of 523,900. Gwinnett's strong
employment base, transportation networks, excellent public education system and
affordable home prices contribute to the county's remarkable growth. Gwinnett
is home to approximately 250 international firms, over 700 manufacturing and
480 high technology firms that generate many of its 254,600 jobs. Since 1990,
Gwinnett has added 102,600 jobs, which is second only to Fulton county in the
Atlanta region. The average household income of the county is approximately
$67,000. Gwinnett County is home to communities located in the City of Duluth,
Peachtree Corners and unincorporated Gwinnett.
Duluth Area - Plantation Trace, River Oaks, and Bradford Creek Communities
Duluth. The City of Duluth is located in central Gwinnett County and
is home to the Plantation Trace, River Oaks, and Bradford Creek communities.
Duluth has exceeded even Gwinnett County as a whole in percentage of population
growth; its population has increased more than 200% since 1980. Duluth is
located near I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional
mall.
Plantation Trace. Plantation Trace is a 232-unit garden apartment
community that was completed in two phases: a 182-unit first phase in 1990 and
a 50-unit second phase in 1998, sometimes referred to below as Phase II.
Plantation Trace consists of 31 two and three story Nantucket-style stone and
wood sided buildings located on a 29.2-acre site on Pleasant Hill Road
approximately one-half mile west of its intersection with Peachtree Industrial
Boulevard. In 1990, the 182-unit first phase received the Aurora Award from the
Southeast Builders' Conference for "Best Rental Apartment Community in the
Southeast."
The Plantation Trace community, with its award-winning traditional
architecture and landscaped grounds, features a clubhouse, a modern fitness and
exercise facility, two lighted tennis courts, sand volleyball court,
multi-station playground, two free-form swimming pools, a small wading pool, a
stone paver pool deck and a covered whirlpool spa. In addition to upscale
amenities, Plantation Trace offers such interior features as nine foot
ceilings, crown molding, pickled wood cabinetry in the kitchen and bath, marble
vanity tops, fireplaces, vaulted ceilings and Palladian windows in select
units, designer wallcoverings and full laundry rooms with washer and dryer
connections. Phase II provides the Plantation Trace community direct access to
the Chattahoochee River, as well as to jogging trails around the existing lake
and nature areas along the river.
Plantation Trace has a variety of floor plans, including 28 one
bedroom units ranging from 901 to 929 square feet, 48 two bedroom standard and
66 two bedroom roommate units ranging from 1,228 to 1,298 square feet, and 40
three bedroom units ranging from 1,471 to 1,494 square feet. Phase II contains
7 one bedroom units of approximately 966 square feet each, 6 two bedroom units
of approximately 1,433 square feet each, 18 two bedroom townhouses of
approximately 1,490 square feet each, 12 three bedroom townhouses of
approximately 1,948 square feet each, 7 four bedroom townhouses of
approximately 2,314 square feet each, and 33 garages of 200 square feet each.
The weighted average unit size is 1,340 square feet. As of December 31, 1999,
rental rates ranged from $730 to $1,750 per month, with a weighted average
monthly rent of $974 per unit and $0.73 per square foot. Local real estate
taxes were $228,000 in 1999. The physical occupancy rate for the entire
Plantation Trace community as of December 31, 1999 was 85.3%.
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<PAGE> 14
River Oaks. River Oaks, which was completed in 1992, consists of 22
two and three story Charleston-style brick and wood sided buildings located on
a 31.6 acre site on Pleasant Hill Road adjacent to the Chattahoochee River to
the west and the Plantation Trace community to the east. The River Oaks
community, with its traditional architecture and landscaped grounds, features a
large clubhouse with a fitness center, two lighted tennis courts, sand
volleyball court, multi-station playground, free-form swimming pool, stone
paver pool deck, and whirlpool spa. In addition to upscale amenities, River
Oaks offers such interior features as nine foot ceilings, crown molding, garden
tubs, pickled pine cabinetry in the kitchen and bath, marble vanity tops,
fireplaces and vaulted ceilings in select units, designer wallcoverings, and
full laundry rooms with washer and dryer connections.
River Oaks has a variety of floor plans, including 40 one bedroom
units at approximately 907 square feet, 32 two bedroom roommate units, 24 two
bedroom deluxe units and 48 two bedroom standard units ranging from 1,276 to
1,309 square feet, and 72 three bedroom units with approximately 1,457 square
feet. The weighted average unit size is 1,278 square feet. As of December 31,
1999, the community was 92% occupied, and rental rates ranged from $790 to
$1,085 per month, with a weighted average monthly rent of $940 per unit and
$0.74 per square foot. Local real estate taxes were $205,000 in 1999.
Bradford Creek. Bradford Creek, which was completed in 1998, consists
of 9 two and three story buildings located on an approximately 22.5 acre
property near the southeast corner of Peachtree Industrial Boulevard and Howell
Ferry Road in Duluth, approximately one-mile southeast of Plantation Trace and
River Oaks. The Bradford Creek community, with its unique mountain lodge
architecture and traditional landscaping, features a large clubhouse with a
fitness center, clubroom, laundry room, two lighted tennis courts, free-form
swimming pool, stone paver pool deck, a 12-acre nature area, a courtyard
highlighted by a water fountain, and a gated entrance. In addition to the
upscale amenities, Bradford Creek offers such interior features as nine foot
ceilings and a computer room in select units, crown moldings, garden tubs,
white raised-panel cabinetry in the kitchen and bath, marble vanity tops,
breakfast bars, designer wallcoverings, and full laundry rooms with washer and
dryer connections. Each building was constructed using cobblestone and vinyl
siding and offers private patios or balconies along with gables and varying
paint colors.
Bradford Creek contains 28 one bedroom units of approximately 1,001
square feet each, 46 two bedroom standard units of approximately 1,302 square
feet each, 47 two bedroom roommate units of approximately 1,344 square feet
each, and 59 three bedroom units of approximately 1,589 square feet each. The
weighted average unit size is 1,355 square feet. As of December 31, 1999, the
community was 88% occupied, and rental rates ranged from $815 to $1,170 per
month, resulting in a weighted average monthly rent of $968 per unit and $0.71
per square foot. Local real estate taxes were $180,000 in 1999.
Peachtree Corners Area - Rosewood Plantation and Ivey Brook Communities
Peachtree Corners. Located in west Gwinnett County, Peachtree Corners
benefits from the existing transportation networks, employment
resources and consumer conveniences in the area. Over 400 companies are located
in the Peachtree Corners area, occupying more than 4,500,000 square feet of
office and distribution space and providing Gwinnett County with approximately
35% of its total jobs. Peachtree Corners' most prominent office/institutional
development is Technology Park/Atlanta, which has become the premier location
in Georgia for national and international high tech companies. With over
2,100,000 square feet of space occupied by more than 70 firms, approximately
4,500 people are employed at Technology Park/Atlanta. The area is within eight
miles of three regional shopping malls, each containing over 1,000,000 square
feet of retail space.
Rosewood Plantation. This community, which was completed in May 1994,
targets the upper tier of the apartment resident market. The 152-unit community
is located on Spalding Drive just southwest of Holcomb Bridge Road on a 21-acre
site. Since 1989, each of the elementary, middle and high schools serving the
community has been designated as the Gwinnett County School of Excellence by
the Gwinnett County Board of Education for at least one year, and the middle
school has been designated as a Georgia School of Excellence by the Georgia
Department of Education and a National Blue Ribbon School of Excellence by the
U.S. Department of Education. Due partly to the highly regarded public school
system in the area, Rosewood Plantation is an attractive choice for
white-collar
13
<PAGE> 15
professionals and families who choose the rental lifestyle. Rosewood Plantation
is composed of 7 two and three story buildings with brick accents and wood
siding.
Rosewood Plantation has 29 one-bedroom units with 914 square feet, 45
two bedroom standard units with 1,247 to 1,276 square feet, 43 two-bedroom
roommate units with 1,310 square feet, and 35 three-bedroom units with 1,510
square feet. The weighted average unit size is 1,265 square feet. As of
December 31, 1999, the community was 98% occupied, and rental rates ranged from
$830 to $1,180, resulting in a weighted average monthly rent of $960 per unit
and $0.76 per square foot. Local real estate taxes were $128,000 in 1999.
Rosewood Plantation's amenities include a clubhouse offering an
exercise room with weight equipment, and a clubroom with a big screen
television and bar with kitchen facilities. The recreational area includes a
free-form swimming pool with stone paver deck, lighted tennis court, children's
playground, walking trails through the nature area, and a two-acre lake.
Each building is patterned after the architecture of Charleston,
featuring columned porches, transom windows, and distinctive gables. The
interior of each apartment home offers high-end finishes such as crown molding,
garden tubs, marble vanity tops, bay windows, and large walk-in closets.
Ivey Brook. The Ivey Brook community consists of 146 upscale apartment
units in 12 buildings located on an 11.8 acre site at the intersection of
Holcomb Bridge Road and Peachtree Corners Circle in the Peachtree Corners area.
Ivey Brook benefits from its excellent location at a major intersection amidst
an established multifamily market area in close proximity to Gwinnett County's
largest employment base.
Ivey Brook has 13 one-bedroom units with approximately 956 square
feet, 36 two bedroom standard units with approximately 1,231 square feet, 50
two-bedroom roommate units with approximately 1,321 square feet, and 47
three-bedroom units with approximately 1,546 square feet. The weighted average
unit size is approximately 1,350 square feet. As of December 31, 1999, Ivey
Brook was 95% occupied, and its rental rates ranged from $875 to $1,230,
resulting in a weighted average monthly rent of $1,032 per unit and $0.76 per
square foot. Local real estate taxes were $128,000 in 1999.
The buildings are of traditional design with brick accents and vinyl
siding with the facades varying from building to building. Exterior features
include gables, bay windows, varying paint colors with white trim, and private
patios or balconies. Extensive landscaping includes mature trees, flowers, and
shrubbery. The interior features include crown molding in the living/dining
rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden
tubs, and private balconies, and the three bedroom units feature a separate
computer room with a built-in desk, cabinetry, and wiring. Recreational
amenities include a swimming pool and fitness center.
Unincorporated Gwinnett - Old Norcross
The Old Norcross community will be located on a 35.3 acre site at the
intersection of Old Norcross Road and Herrington Road in unincorporated
Gwinnett County near the western Lawrenceville area. This community will have
approximately 249 garden-style apartments. We have not determined the unit mix
or developed an estimate of the construction costs. The site for the community
is located near I-85, GA-316 and Gwinnett Place Mall, an 1,100,000 square foot
regional mall.
14
<PAGE> 16
FULTON COUNTY
Fulton County is the largest county in the Atlanta Region in terms of
population, employment, housing units and land area. Between 1990 and 1998,
Fulton's net population increase, 102,500 persons, ranked second in the region
behind Gwinnett County. Fulton County added 96,600 jobs between 1990 and 1998,
which led the region.
Perimeter Center/North Springs Area - Preston Oaks and Highland Park
Communities
Perimeter Center/North Springs. The Perimeter Center/North Springs
area offers convenient proximity and access to both urban and suburban
employment bases and retail conveniences. Georgia 400 and I-285 provide direct
access within minutes to major regional malls such as North Point Mall and
Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown
Atlanta's Central Business District are readily accessible via the Georgia 400
extension, which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and
office developments. The south quadrant of the area includes medical facilities
such as Northside Hospital, St. Joseph's Hospital and Egleston Scottish Rite
Children's Hospital. Perimeter Center encompasses office developments that
exceed 18,500,000 square feet of space, with such upscale facilities as
Ravinia, Northpark Town Center, Concourse and Perimeter Center Office Park.
Several prominent companies such as Holiday Inn, UPS, and Hewlett-Packard have
located their worldwide or regional headquarters within the Perimeter Center
area.
This area, which includes portions of Fulton and DeKalb Counties, has
an average household income of approximately $73,000, which is considerably
higher than the metropolitan Atlanta average of $44,913. The median value of a
single-family home in this area exceeds $200,000.
Preston Oaks. Preston Oaks is a 213-unit garden apartment community
that was completed in two phases: a 189-unit first phase in August 1995, and a
50-unit second phase in 1998. Preston Oaks consists of nine two and three story
buildings located on Mt. Vernon Highway in the Perimeter Center area. The
traditional architecture consists of stacked stone and vinyl siding
incorporating details of gabled roofs, Palladian windows, columns, and bay
windows.
The community is located on a 11.5-acre site and features extensive
landscaping. The amenities are similar to those of the other existing
communities, with custom swimming pool, lighted tennis court, fitness center
with individual workout stations, and a large clubhouse. Interior features
include garden tubs, oversized walk-in closets, pickled pine cabinetry in the
kitchen and bath, crown molding, mirrored walls, and chair railing in the
dining rooms. Phase one consists of 36 one-bedroom units, 92 two-bedroom units,
and 61 three-bedroom units. Phase two consists of 24 one bedroom apartment
units with 959 square feet each.
Preston Oaks is conveniently located less than one mile from Perimeter
Mall, a 1,200,000 square foot regional mall, and in close proximity to the
area's numerous office developments. Several stand-alone restaurants and major
retail centers either exist or are being developed near the community.
As of December 31, 1999, Preston Oaks was 96% occupied, and its rental
rates ranged from $860 to $1,260 per month, resulting in a weighted average
monthly rent of $1,021 per unit and $0.85 per square foot. Local real estate
taxes were $231,000 in 1999.
Highland Park. This community consists of 188 upscale apartment units
in a total of eight buildings on a 10.9-acre site. Located on Dunwoody Place in
the North Springs area of Sandy Springs, Highland Park benefits from its close
proximity to Georgia 400, which provides direct access within minutes to major
retail and employment areas to the north such as North Point Mall and the
Windward mixed use project, and to the south such as Perimeter Mall and
Perimeter Center.
15
<PAGE> 17
Highland Park has 42 one-bedroom units with 902 square feet, 32 two
bedroom standard units with 1,225 square feet, 62 two-bedroom roommate units
with 1,285 square feet, and 52 three bedroom units with 1,440 square feet. The
weighted average unit size is 1,232 square feet.
The buildings are of a traditional design with stacked stone accents
and vinyl siding with the facades varying from building to building. Exterior
features include gables, bay windows, various paint colors with white trim, and
private patios or balconies. Extensive landscaping includes mature trees,
flowers and shrubbery. The interiors feature crown molding in the living/dining
rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden
tubs and private balconies. Recreational amenities include a swimming pool,
tennis court, and fitness center.
As of December 31, 1999, Highland Park was 95% occupied and its
monthly rental rates ranged from $815 to $1,180 per month, resulting in a
weighted average monthly rent of $967 per unit and $0.79 per square foot. Local
real estate taxes were $180,000 in 1999.
Alpharetta Area - Addison Place Community
Alpharetta. The Alpharetta area offers convenient proximity and access
to both urban and suburban employment bases and retail conveniences. Georgia
400 provides direct access within minutes to major regional malls such as North
Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area
and downtown Atlanta's Central Business District are readily accessible via the
Georgia 400 extension, which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and
office developments. North Point Mall's success accelerated the already high
rate of residential development, which caters to the upscale consumer. North
Fulton's prestigious neighborhoods have been a major factor in the emergence of
the Georgia 400 corridor as a center for corporate headquarters. Between 1990
and 1999, North Fulton added 92,314 residents, and 41,401 housing units.
Between 1990 and 1997, North Fulton added 59,469 jobs. The Windward project,
which straddles Georgia 400, is the region's largest mixed-use development.
Addison Place Phase I. The 118-unit first phase of Addison Place is
located on 19.2 acres on Abbotts Bridge Road near the intersection of Abbotts
Bridge and Jones Bridge roads. This first phase contains 60 two bedroom
townhouses of approximately 1,497 square feet each and 58 three bedroom
townhouses of approximately 1,903 square feet each. As of December 31, 1999,
the first phase of Addison Place was 56% occupied and rental rates ranged from
$1,140 to $1,495 per month, with a weighted average monthly rent of $1,313 per
unit and $0.77 per square foot. The architectural style, land planning,
landscaping and amenities of this first phase are similar to those of our other
communities.
The construction of this first phase was completed under a cost-plus
10% construction contract with Roberts Properties Construction providing for 5%
profit and 5% overhead. The total cost of construction, including the fee to
Roberts Properties Construction, was approximately $9,611,000. We anticipate
that there was approximately $874,000 in net profit to Roberts Properties
Construction on the construction contract. We funded the development and
construction of this first phase from our working capital and a $9,500,000
construction loan.
Addison Place Phase II. The second phase of Addison Place will contain
285 garden-style apartment homes. It will include 11 different floor plans,
including 60 one bedroom ranging from 765 to 1,034 square feet, 147 two bedroom
units ranging from 1,150 to 1,550 square feet, 58 three bedroom units at
approximately 1,706 square feet, and 20 four bedroom units at approximately
2,074 square feet, along with 40 direct-entry garages. The weighted average unit
size will be 1,415 square feet. The architectural style, land planning, and
landscaping of Phase II will be similar to Phase I. The amenities in Phase II
will feature a free-from swimming pool, 2 tennis courts, a modern fitness and
exercise facility, a business center, mens and womens saunas, and a playground.
DOUGLAS COUNTY
Douglas County, one of the 10 counties in the Atlanta Region, is
located west of Atlanta and encompasses 202 square miles. The county is
surrounded by Fulton, Cobb, Carroll and Paulding Counties, with the
Chattahoochee River as its southeastern border. Its population was estimated at
93,500 in 1999, an increase of 30% since 1990. Between 1990 and 1998, Douglas
County added 9,150 jobs and between 1990 and 1999, the county added 21,800
16
<PAGE> 18
persons and 8,300 housing units. Douglas County benefits from its accessibility
to downtown Atlanta to the east via I-20 and to Hartsfield International
Airport to the southeast via Thornton Road/Camp Creek Parkway. Just across the
county line to the east lies the Fulton Industrial District, the Southeast's
largest contiguous industrial park. The Fulton Industrial District consists of
more than 50,000,000 square feet of both manufacturing and warehouse space and
stretches six miles north and south along Fulton Industrial Boulevard. It
represents 20% of Atlanta's total inventory of warehouse/industrial space, and
an additional 1,000,000 square feet is under construction. Numerous Fortune 500
companies are represented in the Fulton Industrial District, employing more
than 100,000 people.
Thornton Road/I-20 Area - Crestmark Community
Thornton Road/I-20 Area. Thornton Road is the third exit west of I-285
on I-20 and connects I-20 with Hartsfield International Airport to the
southeast and the significant residential base of Douglas, West Cobb and
Paulding counties to the north and east. Several office and business parks that
total more than 2,000,000 square feet of space and house corporations such as
BellSouth, Mitsubishi, Robert Bosch Corporation, TDK Electronics, and
Saab-Scania contribute to a large employment base of approximately 20,000
people within the Thornton Road area. Restaurant, hospitality and retail
conveniences support the existing employment and residential base in the
Thornton Road corridor. The area also benefits from its close proximity to the
Fulton Industrial District as well as the Six Flags Over Georgia amusement
park, both of which are less than three miles away. At the northwest corner of
the Thornton Road/I-20 interchange is the Columbia/HCA Parkway Medical Center,
a 320-bed acute care medical facility that employs approximately 600 people.
Crestmark. Crestmark is a 334-unit garden apartment community that was
completed in two phases: a 248-unit first phase in 1993 and an 86-unit second
phase in 1997. Crestmark consists of 16 three and four story stacked stone and
wood sided buildings, 17 garages and 24 storage units located on a 32.2 acre
site on Thornton Road, approximately one-half mile north of its intersection
with I-20 in Douglas County. In 1993, Crestmark received two Aurora Awards from
the Southeast Builders' Conference, one for "Best Landscape Design in the
Southeast" and another for "Best Recreational Facility in the Southeast."
The Crestmark community, with its award-winning traditional
architecture and landscaped grounds, features a large 14,000 square foot
clubhouse with a club room, full kitchen, fitness center and aerobics room, a
business center and conference room, two lighted tennis courts, multi-station
playground, walking and jogging trail, two free-form swimming pools, stone
paver pool decks and a whirlpool spa. In addition to the upscale amenities,
Crestmark offers such interior features as nine foot ceilings, crown and
chair-rail molding, pickled wood cabinetry in the kitchen and baths, marble
vanity tops, fireplaces, vaulted and trey ceilings, Palladian and bay windows
in select units, designer wallcoverings and full laundry rooms with washer and
dryer connections.
Crestmark has a variety of floor plans including 29 one bedroom
standard units with 704 square feet, 50 one bedroom deluxe units with 816
square feet, 19 one bedroom units of 901 square feet in the second phase, 33
two bedroom standard units with 1,005 square feet, 86 two bedroom deluxe units
with 1,110 square feet, 21 two bedroom standard units of 1,223 square feet in
the second phase, 22 two bedroom roommate units of 1,285 square feet in the
second phase, 50 three bedroom units with 1,295 square feet and 24 three
bedroom units of 1,437 square feet in the second phase. The weighted average
unit size is 1,079 square feet. As of December 31, 1999, the community was 93%
occupied, and rental rates ranged from $675 to $1,025 per month, with a
weighted average monthly rent of $830 per unit and $0.77 per square foot. Local
real estate taxes were $202,000 in 1999.
CHARLOTTE, NORTH CAROLINA - BALLANTYNE
The following information is based on statistics and estimates
published by the Charlotte Chamber of Commerce. During the last ten years,
Charlotte's population grew by 24%, which was well above the national growth
rate of 9%. Since 1986, employment in Charlotte has grown 29%, compared to the
U.S. growth of 14%. Nine of the nation's top 200 banks operate in Charlotte,
including Bank of America, N.A. (which is the nation's largest bank) and First
Union Corporation. Other major employers include Carolinas Healthcare System,
Charlotte-Mecklenburg School System, Duke Energy Corporation and USAirways.
Additionally, nearly 300 of the nation's largest industrial
17
<PAGE> 19
and service corporations listed by FORTUNE magazine have facilities in the
area. Education is a top priority in the area as evidenced by The
Charlotte-Mecklenburg School System recently receiving a national Community
Award for Excellence in Education.
The Ballantyne community will be located on a 23.8 acre site at the
intersection of Lancaster Highway (old NC-521) and John J. Delaney Drive. The
Ballantyne area is the largest mixed-use development in Mecklenburg County. This
community will have 319 garden-style apartments. The Ballantyne community will
consist of 110 one-bedroom units ranging from 765 square feet to 1,034 square
feet, 143 two-bedroom units ranging from 1,150 square feet to 1,550 square feet,
48 three-bedroom units at 1,706 square feet, and 18 four-bedroom units at 2,074
square feet, along with 36 direct-entry garages. We have not developed a final
estimate of the construction cost. The community is located near I-485 and I-77,
which offers convenient access to downtown Charlotte and I-85.
The table on the following page summarizes the amenities of each of
the existing communities and Addison Place Phase II, which is now under
construction. We have not yet fully determined the specific amenities of the
Ballantyne and Old Norcross communities.
18
<PAGE> 20
SUMMARY OF AMENITIES OF THE COMMUNITIES
<TABLE>
<CAPTION>
CLUB-
PATIO, WASHER HOUSE
PORCH & DRYER GARDEN FIRE- VAULTED SWIMMING FITNESS
COMMUNITY BALCONY HOOK-UPS TUBS PLACES* CEILINGS* POOL CENTER
--------- ------- -------- ---- ------ --------- ---- ------
Existing Communities:
<S> <C> <C> <C> <C> <C> <C> <C>
Plantation Yes Yes Yes(1) Yes(2) Yes Yes Yes
Trace
River Oaks Yes Yes Yes Yes Yes Yes Yes
Rosewood Yes Yes Yes No No Yes Yes
Plantation
Preston Oaks Yes Yes Yes No Yes Yes Yes
Highland Yes Yes Yes No Yes Yes Yes
Park
Crestmark Yes Yes Yes Yes Yes Yes Yes
Ivey Brook Yes Yes Yes No Yes Yes Yes
Bradford Creek Yes Yes Yes No Yes Yes Yes
Addison Place Yes Yes Yes No No Yes No
Phase I
Communities Under Construction:
Addison Place Yes Yes Yes Yes No Yes Yes
Phase II
<CAPTION>
SAND
WHIRL- CAR TENNIS VOLLEY- PLAY- LAUNDRY
COMMUNITY POOL WASH COURT(S) BALL GROUND ROOM OTHER
--------- ---- ---- -------- ---- ------ ---- -----
Existing Communities:
<S> <C> <C> <C> <C> <C> <C> <C>
Plantation Yes(2) Yes Yes-2 Yes Yes Yes Riverfront.
Trace Lake, Nature
Preserve
River Oaks Yes Yes Yes-2 Yes Yes Yes Riverfront,
Nature Preserve
Rosewood No Yes Yes-1 No Yes Yes Lake,
Plantation Nature Preserve
Preston Oaks No Yes Yes-1 No No Yes
Highland No Yes Yes-1 No Yes Yes
Park
Crestmark Yes Yes Yes-2 No Yes Yes Nature Preserve,
Jogging Trail
Ivey Brook No Yes No No No Yes
Bradford Creek No Yes Yes-2 No Yes Yes Nature Preserve
Addison Place No Yes Yes-1 No No Yes Lake,
Phase I Nature Trail
Communities Under Construction:
Addison Place No Yes Yes-2 No Yes Yes Lake,
Phase II Nature Trail
</TABLE>
- -------------------
* In select units
(1) Phase II only.
(2) Phase I only.
19
<PAGE> 21
COMPETITION
All of the communities are located in developed areas, and numerous
other apartment projects are located within the market area of each community.
The number of competitive apartment communities in the area could have a
material adverse effect on our ability to lease our apartments at the rental
rates anticipated, and we can give no assurances regarding the development of
additional competing multifamily communities in the future. The remainder of
this section summarizes the competition for each of the communities. The
following information reflects our study of apartment communities in each
submarket that we believe to be closely competitive with our community or
communities within that submarket. This section includes summary information we
obtained from various sources - including developers and real estate brokers,
as well as on-site visits - regarding those apartment communities. Although we
have attempted to verify the information and believe that it is substantially
accurate on the whole, information regarding a particular community may be
incorrect due to the sources relied upon or erroneous information supplied by
competitors.
Plantation Trace, River Oaks, and Bradford Creek. The Duluth
submarket, which we consider to include the area within a two mile radius from
these communities, currently consists of 17 multifamily communities, including
River Oaks, Plantation Trace, and Bradford Creek. Although the Bridgewater
apartment community - which was previously developed and sold by an affiliate
of Mr. Roberts - is located more than two miles from Plantation Trace, it is
also included in the Duluth market area because it offers units with attached
garages and its architecture and amenities are similar to Plantation Trace. Of
the 17 existing communities in the area, five were completed in the last two
years, including Bradford Creek and the second phase of Plantation Trace. Due
to the quality of construction, age of the communities, type of amenities,
resident profiles and rental rates, we believe that only nine of the other 14
communities are in direct competition with Plantation Trace, River Oaks and
Bradford Creek.
Rosewood Plantation and Ivey Brook. The Peachtree Corners multifamily
submarket, which we believe includes the area within a three mile radius from
these two communities, currently consists of 27 multifamily communities,
including Rosewood Plantation and Ivey Brook. Of the 27 existing communities in
the market area, only eight have been built since 1988. The remaining
communities range from approximately 13 to over 20 years old. We believe that
Rosewood Plantation and Ivey Brook draw residents from all of the other 25
communities located in the market area but that only six of the 25 communities
compete closely with Rosewood Plantation and Ivey Brook.
Preston Oaks. We believe that the north central Perimeter multifamily
submarket includes the area within a two-mile radius around this community. It
is generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the
east, Spalding Drive to the north and Glenridge Drive to the south, and it
currently consists of 25 multifamily communities, including Preston Oaks. Of
the 24 other existing communities in the market area, only six were built
before 1983. The remaining 18 communities range from approximately one to eight
years of age. We believe that Preston Oaks competes with all 24 of these
communities.
Highland Park. We believe the North Springs multifamily submarket
includes the area within an approximately two-mile radius around this community.
It is generally bounded by the Chattahoochee River to the north and west,
Georgia 400 to the east and Dalrymple Road to the south, and currently consists
of 34 communities, including Highland Park. Of the 34 existing communities in
the market area, only five have been built since 1989. The remaining communities
range in age from 12 years to over 20 years. We believe that Highland Park will
draw residents from all of the other 33 communities located in the market area,
but that only 11 of the 33 communities will compete closely with Highland Park.
Crestmark. We consider the Thornton Road multifamily submarket to be
the area within an approximately two-mile radius around the Crestmark
community. It is generally bounded by I-20 to the south, Blairs Bridge Road to
the east, and Georgia Highway 78 to the north and west, and it currently
consists of eight communities, including Crestmark. Of the eight existing
communities in the market area, four have been built since 1990. We believe
that Crestmark will draw residents from all of the seven other communities
located in the market area, but due to their amenities, quality of construction
and resident profile, only five of the seven other communities will compete
closely with Crestmark.
Addison Place. We believe the Alpharetta multifamily submarket
includes the area within an approximately two-mile radius around the Abbotts
Bridge community. It is generally bounded by the Chattahoochee River to the
east,
20
<PAGE> 22
Old Alabama to the south, Georgia 400 to the west, and Windward Parkway to the
north, and it currently consists of 15 communities, including Addison Place. We
believe that Addison Place will draw residents from all of the 14 other
communities located in the market area, but due to their amenities, quality of
construction and resident profile, only 13 of the 14 other communities will
compete closely with Addison Place.
Ballantyne. We consider the Ballantyne multifamily submarket to
include the area within an approximately two-mile radius around the community.
It is generally bounded by the Princeton Road to the east, Providence Road West
to the south, Lancaster Highway (old NC-521) to the west, and I-485 to the
north, and it currently consists of nine communities, including Ballantyne. We
believe that once construction of Ballantyne is complete, it will draw
residents from all of the eight other existing communities located in the
market area and will compete with the four communities under construction in
the market area.
Old Norcross. We believe the Old Norcross multifamily submarket
includes the area within an approximately two-mile radius around the Old
Norcross community. It is generally bounded by Herrington Road to the east,
Club Drive to the south, Steve Reynolds Boulevard to the west, and Sugarloaf to
the north and east, and it currently consists of 24 communities, including Old
Norcross. We believe that Old Norcross will draw residents from all of the 23
other communities located in the market area, but due to their amenities,
quality of construction and resident profile, only 15 of the 23 other
communities will compete closely with Old Norcross.
SUMMARY OF DEBT SECURED BY THE COMMUNITIES
Information regarding our indebtedness secured by the communities is
as follows:
<TABLE>
<CAPTION>
Principal Principal Fixed Monthly
Balance at Maturity Balance at Interest Amortization Principal and
Community Dec. 31, 1999 Date Maturity Rate Schedule Interest Payment
--------- ------------- ---------- ------------ ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Plantation Trace $ 11,760,000 10-15-08 $ 10,313,000(1) 7.09% 30-year $ 79,892
River Oaks 8,946,000 11-15-03 8,513,000(2) 7.15 30-year 62,475
Rosewood Plantation 7,973,000 07-15-08 6,939,000(1) 6.62 30-year 51,838
Preston Oaks 8,313,000 10-15-02 8,025,000(2) 7.21 30-year 59,188
Highland Park 7,844,000 02-15-03 7,544,000(2) 7.30 30-year 56,066
Ivey Brook 6,228,000 02-15-07 5,570,000(2) 7.14 30-year 43,318
Crestmark 15,778,000 10-01-08 13,690,000(3) 6.57 30-year 101,869
Bradford Creek 8,273,000 06-15-08 7,290,000(2) 7.15 30-year 56,734
Addison Place Ph. I 9,500,000 11-15-09 8,387,000(1) 6.95 30-year 55,021(4)
</TABLE>
- ------------------
(1) Each of the loans secured by the Plantation Trace, Rosewood Plantation
and Addison Place Phase I communities may be prepaid upon payment of a
premium equal to the greater of (a) 1% multiplied by a fraction having
as its numerator the number of months to maturity and its denominator
the number of months in the full term of the loan, or (b) the present
value of the loan less the amount of principal and accrued interest
being repaid. Each loan may be prepaid in full during the last 30 days
before its maturity date without any prepayment premium.
(2) Each of the loans secured by the River Oaks, Preston Oaks, Highland
Park, Ivey Brook and Bradford Creek communities may be prepaid in full
upon payment of a premium equal to the greater of (a) 1% of the
outstanding principal balance of the loan, or (b) the sum of the
present value of the scheduled monthly payments to the maturity date
and the present value of the balloon payment due on the maturity date,
less the outstanding principal balance of the loan on the date of
prepayment. Each loan may be prepaid in full during the last 90 days
before its maturity date without any prepayment premium.
21
<PAGE> 23
(3) The loan secured by the Crestmark community may be prepaid upon the
payment of a premium equal to the greater of (a) 1% of the outstanding
principal balance, or (b) the product obtained by multiplying the
amount of principal being prepaid by the excess (if any) of the
monthly note rate over the assumed reinvestment rate by the present
value factor. If the loan is prepaid after expiration of the yield
maintenance period, but more than 90 days before the maturity date,
the prepayment premium shall be 1% of the unpaid principal balance of
the note. The loan may be prepaid in full during the last 90 days
before its maturity date without any prepayment premium.
(4) The loan secured by Addison Place Phase I includes interest only
payments for the first year of $55,021 per month. Beginning with the
December 2000 payment, the principal and interest payments will be
$62,885 per month.
POSSIBLE ADDITIONAL COMMUNITIES TO BE DEVELOPED
From time to time Roberts Properties plans the development of other
apartment communities to be located on property owned by Roberts Properties or
other affiliates of Mr. Roberts, or on property that one of those entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity by
syndicating a limited partnership. Alternatively, we may seek to raise the
equity required to purchase and develop the community by selling shares. If Mr.
Roberts elects to raise equity through a limited partnership, Mr. Roberts may
seek to cause the partnership to be merged into the operating partnership at a
later date. A transaction of that nature would require the consent of a
majority in interest of the limited partners of the partnership and of a
majority of the disinterested members of our board of directors, and we can
give no assurances regarding whether Mr. Roberts will ultimately determine to
seek a merger in that manner, or whether such a merger would in fact be
approved by the requisite majority in interest of limited partners in the
partnership and by a majority of the disinterested members of the Board.
As described above in "Part I, Item 1, Description of Business -
Growth Strategies - Development Strategy," three other multifamily apartment
communities that are anticipated to total 853 apartment homes are in the
development or construction stage.
OTHER REAL ESTATE ASSETS
The operating partnership sold its two retail centers totaling 15,698
square feet on July 17, 1998 for $2,400,000 in cash resulting in a gain, net of
minority interest, of $300,000. Net sales proceeds were $2,182,000, after
deducting for closing costs and prorations of $218,000. We reinvested the net
proceeds in new apartment communities. The purchaser was unaffiliated with us,
and the transaction was negotiated at arms-length. The net book value of the
property was $1,715,000 at June 30, 1998. We paid Roberts Properties $92,500
for consulting fees in connection with the sale. The retail centers together
composed less than 1% of our assets and generated less than 2% of our gross
revenues for 1998.
ITEM 3. LEGAL PROCEEDINGS.
Neither Roberts Realty, the operating partnership, nor the communities
are presently subject to any material litigation nor, to our knowledge, is any
material litigation threatened against any of them. Routine litigation arising
in the ordinary course of business is not expected to result in any material
losses to us or the operating partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the
fourth quarter of 1999.
22
<PAGE> 24
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock began trading on the American Stock Exchange, or
AMEX, on December 9, 1997 under the symbol "RPI." Before that date there was no
established public trading market for the common stock. The following table
sets forth the quarterly high and low closing sales prices per share reported
on the AMEX, as well as the quarterly dividends declared per share:
<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Declared
------------- ------- ------- ---------
<S> <C> <C> <C>
1998
First Quarter $9.4375 $8.2500 $0.1425
Second Quarter 9.0000 8.2500 0.1450
Third Quarter 8.9375 7.3750 0.1450
Fourth Quarter 7.8750 7.0625 0.1450
1999
First Quarter $7.6250 $7.1250 $0.1500
Second Quarter 7.7500 7.2500 0.1500
Third Quarter 8.5000 7.5000 0.6500 *
Fourth Quarter 7.8125 7.3125 0.1350
</TABLE>
* Includes a special dividend of $0.50 per share.
On March 1, 2000 there were approximately 900 holders of record of the
common stock.
As of March 1, 2000, we had 4,840,075 shares outstanding. In addition,
2,563,691 shares are reserved for issuance to unitholders from time to time
upon their exercise of redemption rights as explained in "Part I, Item 1,
Description of Business The Operating Partnership." There is no established
public trading market for the units. As of March 1, 2000, the operating
partnership had 319 unitholders of record.
We depend upon distributions from the operating partnership to fund
our distributions to shareholders. Distributions by the operating partnership,
and thus distributions by us, will continue to be at the discretion of the
board of directors and will be equal in amount for each unit and share. We and
the operating partnership declared quarterly distributions for 1999 that
totaled $1.085 per share/unit per annum (including a special distribution of
$0.50 per share/unit in August 1999 as a result of the sale of our Bentley
Place community) and for 1998 that totaled $0.5775 per share/unit per annum.
Approximately 11.39% of those 1999 distributions represented ordinary income,
19.70% represented capital gain and the remaining 68.91% represented a return
of capital.
We elected to become a REIT beginning with the partial year ended
December 31, 1994. To maintain our qualification as a REIT under the Internal
Revenue Code, we must make annual distributions to shareholders of at least 95%
of our taxable income, which does not include net capital gains. Under some
circumstances, we may be required to make distributions in excess of cash
available for distribution to meet those distribution requirements.
During the fourth quarter of 1999, we issued a total of 7,571 shares
of restricted common stock to seven employees as incentive compensation. The
restrictions on transfer lapse at specified dates ranging between three and
four years after the respective grant date. The grants were exempt from
registration as private placements under section 4(2) of the Securities Act. We
affixed appropriate legends to the share certificates we issued in these
transactions. All recipients of these securities had adequate access, through
their relationships with us, to information about us. All of these securities
are deemed to be restricted securities for purposes of the Securities Act.
23
<PAGE> 25
ITEM 6. SELECTED FINANCIAL DATA.
OPERATING DATA:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997 1996 1995
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental operations $ 18,163 $ 16,521 $ 16,831 $ 14,651 $ 6,677
Other operating income 1,221 833 741 546 289
-------- -------- -------- -------- -------
Total revenues 19,384 17,354 17,572 15,197 6,966
-------- -------- -------- -------- -------
Expenses:
Property operating and maintenance expense (exclusive of
depreciation and amortization) (1) 6,688 6,192 5,504 5,091 2,207
Depreciation of real estate assets 5,529 5,017 5,708 4,974 2,326
Management fees to related party (2) 0 0 211 760 347
Interest expense 5,244 4,555 4,670 3,724 2,006
Interest income (159) (384) (395) (353) (277)
Amortization of deferred financing costs 219 139 122 141 178
Other amortization expense 11 52 65 67 69
General and administrative 1,964 1,727 1,714 926 430
Acquisition of Roberts Properties Management, LLC (3) 0 0 5,900 0 0
Loss on disposal of assets 81 94 156 0 0
-------- -------- -------- -------- -------
Total expenses 19,577 17,392 23,655 15,330 7,286
-------- -------- -------- -------- -------
LOSS BEFORE MINORITY INTEREST, GAINS ON SALE OF
REAL ESTATE ASSETS, AND EXTRAORDINARY ITEMS (193) (38) (6,083) (133) (320)
MINORITY INTEREST OF UNITHOLDERS
IN THE OPERATING PARTNERSHIP 70 15 2,646 52 141
-------- -------- -------- -------- -------
LOSS BEFORE GAINS ON SALE OF REAL ESTATE
ASSETS AND EXTRAORDINARY ITEMS (123) (23) (3,437) (81) (179)
GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
of unitholders in the operating partnership 1,023 1,218 1,012 0 9
-------- -------- -------- -------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 900 1,195 (2,425) (81) (170)
EXTRAORDINARY ITEMS, loss on early extinguishment of debt, net
of minority interest of unitholders in the operating partnership (4) (184) (487) (184) (99) (102)
-------- -------- -------- -------- -------
Net income (loss) $ 716 $ 708 $ (2,609) $ (180) $ (272)
======== ======== ======== ======== =======
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary items $ 0.19 $ 0.26 $ (0.58) $ (0.02) $ (0.08)
Extraordinary items (0.04) (0.11) (0.04) (0.03 (0.05)
-------- -------- -------- -------- -------
Net income (loss) $ 0.15 $ 0.15 $ (0.62) $ (0.05 $ (0.13)
======== ======== ======== ======== =======
Dividends declared (5) $ 1.0850 $ 0.5775 $ 0.5760 $ 0.4813 N/A
======== ======== ======== ======== =======
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate assets, before accumulated depreciation $ 128,898 $ 122,830 $ 111,778 $110,800 $ 74,243
Real estate assets, net of accumulated depreciation 107,869 105,916 98,337 101,885 70,303
Total assets 127,078 125,090 118,350 116,815 77,324
Total debt 88,850 79,973 67,951 63,342 44,019
Minority interest of unitholders in the operating partnership 12,013 15,579 18,861 19,322 13,873
Shareholders' equity 22,310 26,526 26,697 29,226 17,728
OTHER DATA:
Cash flow provided from (used in):
Operating activities $ 5,917 $ 5,295 $ 5,469 $ 5,567 $ 1,799
Investing activities (7,003) (18,235) (1,537) (16,309) (21,119)
Financing activities (1,347) 9,929 23 12,500 19,716
--------- --------- --------- -------- ---------
Net increase (decrease) in cash and cash equivalents (2,433) (3,011) 3,955 1,758 396
Cash and cash equivalents, beginning of year 4,106 7,117 3,162 1,404 1,008
Cash and cash equivalents, end of year 1,673 4,106 7,117 3,162 1,404
Funds from operations (6) 5,417 5,114 5,746 4,908 2,075
Weighted average common shares outstanding - basic 4,737,008 4,638,265 4,187,013 3,799,567 2,023,358
Weighted average common shares outstanding - diluted 7,448,757 7,547,978 7,404,323 6,244,513 3,617,320
Total stabilized communities (at end of year) 9 9 9 9 7
Total stabilized apartments (at end of year) 1,779 1,778 1,756 1,731 1,366
Average physical occupancy (stabilized communities) (7) 93.7% 96.3% 95.4% 97.2% 99.0%
</TABLE>
(1) Property operating expenses include personnel, utilities, real
estate taxes, insurance, maintenance, landscaping, marketing, and
property administration expenses (real estate taxes include an
adjustment of $588,000 in 1997 to reduce estimated property tax
accruals for two properties that received favorable tax
assessments).
(2) Because we acquired Roberts Properties Management, LLC on April 1,
1997, we paid no management fees to a related party after April 1,
1997; however, we incurred additional general and administrative
expenses as a result of managing our properties internally.
(3) On April 1, 1997, we acquired Roberts Management, the property
management company that managed our multifamily apartment
communities since our inception. The operating partnership issued
590,000 units valued at $10.00 per unit or $5,900,000 to purchase
Roberts Management. We manage our own properties using Roberts
Management's property management systems and the property
management personnel formerly employed by Roberts Management.
Although we no longer pay 5% of gross property revenues to Roberts
Management for property management services, we do bear the actual
overhead cost of managing the properties internally. Because
Roberts Management, a related party, managed only properties we
owned, the transaction was accounted for as the settlement of a
contract and expensed for the year ended December 31, 1997.
(4) The extraordinary items resulted from costs associated with the
early extinguishment of indebtedness. The extraordinary items have
been reduced by the portion related to the minority interest of the
unitholders.
(5) We began paying dividends and distributions on our common stock and
units beginning on April 15, 1996.
(6) Funds from Operations, or FFO, is defined by the National
Association of Real Estate Investment Trusts as net income (loss),
computed in accordance with generally accepted accounting
principles, excluding gains (or losses) from debt restructuring and
sales of property and non-recurring items, plus real estate
related depreciation and amortization. We use the NAREIT definition
of FFO, which was adopted for periods beginning after January 1,
1996. We consider FFO to be an important measure of our operating
performance; however, FFO does not represent amounts available for
management's discretionary use because of needed capital
replacement or expansion, debt service obligations, property
acquisitions, development and distributions, or other commitments
and uncertainties. FFO should not be considered as an alternative
to net income (determined in accordance with GAAP) as an
indication of our financial performance or cash flows from
operating activities (determined in accordance with GAAP) as a
measure of our liquidity, nor is it indicative of funds available
to fund our cash needs, including our ability to make
distributions. We consider FFO to be an important measure of our
operating
25
<PAGE> 27
performance. While FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP,
FFO does provide investors with additional information with which
to evaluate the ability of a REIT to pay dividends, meet required
debt service payments and fund capital expenditures. We believe
that to gain a clear understanding of our operating results, FFO
should be evaluated in conjunction with net income (determined in
accordance with GAAP). FFO represents funds from operations
available for shareholders and unitholders.
(7) Represents the average physical occupancy of the stabilized
communities calculated by dividing the total number of vacant days
by the total possible number of vacant days for each period and
subtracting the resulting number from 100%.
26
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
This report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These statements relate to future economic performance,
plans and objectives of management for future operations and projections of
revenues and other financial items that are based on the beliefs of our
management, as well as assumptions made by, and information currently available
to, our management. The words "expect," "estimate," "anticipate," "believe" and
similar expressions are intended to identify forward-looking statements. Those
statements involve risks, uncertainties and assumptions, including industry and
economic conditions, competition and other factors discussed in this and our
other filings with the SEC, including the "Risk Factors" section of the
prospectus included in our Registration Statement on Form S-3 (Registration
number 333-82453), as declared effective by the SEC on August 2, 1999. If one
or more of these risks or uncertainties materialize or underlying assumptions
prove incorrect, actual outcomes may vary materially from those indicated. See
"Disclosure Regarding Forward-Looking Statements" at the end of this Item for a
description of some of the important factors that may affect actual outcomes.
OVERVIEW
We own multifamily residential properties as a self-administered and
self-managed equity real estate investment trust. At December 31, 1999, we
owned nine completed multifamily apartment communities, of which eight were
stabilized, consisting of 1,779 apartment homes.
As part of our business plan and growth strategy, we sold our 117-unit
Bentley Place community in August 1999, our 232-unit Windsong community in
January 1998, and our 207-unit Autumn Ridge community in August 1997. Our
decision to sell these three communities was based on their age and locations
in markets that are not included in our long-term growth strategy. In July
1998, we sold our two small retail centers because we decided to exit all
businesses not related to the long-term ownership of high quality apartment
homes.
In June 1998, we used the equity from the sale of Windsong and cash to
purchase three separate parcels of land for $11.3 million. We are developing and
building three new multifamily communities totaling 971 apartment homes, of
which 118 apartment homes were completed during the fourth quarter of 1999. The
853 apartment homes under development or construction will increase the size of
our portfolio 48% from 1,779 to 2,632 apartment homes. One of our new
communities under construction is located in Charlotte, North Carolina, and is
the first step in our diversification strategy. The other two communities are
located in north Atlanta. We began construction of the 285-unit second phase of
Addison Place Phase II during the third quarter of 1999, and we expect to
commence construction of a 249-unit apartment home community located in north
Atlanta during the second quarter of 2000.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
For the year ended December 31, 1999, we recorded net income of
$716,000 or $0.15 per share compared to net income of $708,000 or $0.15 per
share for the year ended December 31, 1998 and a net loss of $2,609,000 or
$0.62 per share for the year ended December 31, 1997. The $8,000 increase in
net income from $708,000 in 1998 to $716,000 in 1999 is due primarily to the
following:
(a) the start of leasing operations at Addison Place Phase I in
April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek
in August 1998 and the second phases of Preston Oaks in July
1998 and Plantation Trace in November 1998;
(c) a $307,000 increase in water revenue from $50,000 in 1998 to
$357,000 in 1999;
offset by:
27
<PAGE> 29
(d) the gain on the sale of Bentley Place in August 1999 compared
to the gains on the sales of Windsong and the two retail
centers in 1998;
(e) higher interest expense due to:
- the permanent financing of Bradford Creek in June
1998;
- the refinancing of Rosewood Plantation for a higher
loan amount in June 1998;
- the refinancing of Plantation Trace for a higher loan
amount in September 1998;
- the refinancing of Crestmark for a higher loan amount
in September 1998;
- construction loan interest on the Addison Place
Townhomes in 1999;
- and the permanent financing of the Addison Place
Townhomes in October 1999;
(f) higher general and administrative costs;
(g) increased depreciation expense; and
(h) the decline in average stabilized occupancy from 96.3% in 1998
to 93.7% in 1999.
The increase in net income of $3,317,000 from a net loss of $2,609,000
in 1997 to net income of $708,000 in 1998 is due primarily to the following:
(a) the April 1, 1997 acquisition of Roberts Management, an
affiliate owned by Mr. Roberts;
offset by:
(b) the gains on the sales of Windsong and the two retail centers
compared to the gain on the sales of Autumn Ridge in August
1997; and
(c) the completion of the initial lease-up phase at Ivey Brook in
July 1997 and the second phase of Crestmark in August 1997,
versus the completion of the initial lease-up phase at
Bradford Creek in August 1998 and the second phases of
Preston Oaks in July 1998 and Plantation Trace in November
1998; and
(d) an increase in average stabilized occupancy from 95.4% to
96.3%.
Our operating performance for all communities is summarized in the following
table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
(dollars in thousands) ------------------------------ ----------------------------
% %
1999 1998 CHANGE 1998 1997 CHANGE
------- ------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Total operating revenues $19,384 $17,354 11.7% $17,354 $17,572 (1.2%)
Property operating expenses (1) $ 6,688 $ 6,192 8.0% $ 6,192 $ 6,092 1.6%
Management fees paid to related party (2) $ 0 $ 0 0.0% $ 0 $ 211 (100.0%)
General and administrative expenses $ 1,964 $ 1,727 13.7% $ 1,727 $ 1,714 0.8%
Net operating income (3) $12,696 $11,162 13.7% $11,162 $11,480 (2.8%)
Depreciation of real estate assets $ 5,529 $ 5,017 10.2% $ 5,017 $ 5,708 (12.1%)
Average stabilized occupancy (4) 93.7% 96.3% (2.6%) 96.3% 95.4% 0.9%
Operating expense ratio (5) 34.5% 35.7% (1.2%) 35.7% 34.7% 1.0%
</TABLE>
- ---------------
(1) Property operating expenses include personnel, utilities, real
estate taxes, insurance, maintenance, landscaping, marketing, and
property administration expenses (real estate taxes excludes an
adjustment of $588,000 in 1997 to reduce estimated property tax
accruals for two properties that received favorable tax
assessments).
28
<PAGE> 30
(2) Because we acquired Roberts Management on April 1, 1997, we paid no
management fees to a related party after March 31, 1997; however, we
incurred additional general and administrative expenses as a result
of managing our properties internally.
(3) Net operating income is equal to total operating revenues minus
property operating expenses.
(4) Represents the average physical occupancy of our stabilized
properties calculated by dividing the total number of vacant days by
the total possible number of vacant days for each period and
subtracting the resulting number from 100%. The calculation includes
the following: (a) Highland Park beginning March 1, 1996, Ivey Brook
beginning August 1, 1997, the second phase of Crestmark beginning
September 1, 1997, the second phase of Preston Oaks beginning August
1, 1998, Bradford Creek beginning September 1, 1998 and the second
phase of Plantation Trace beginning December 1, 1998, which are the
dates each community achieved stabilized occupancy; (b) Autumn Ridge
only through August 26, 1997, which is the date the property was
sold, (c) Windsong only through January 9, 1998, which is the date
the property was sold, and (d) Bentley Place only through August 23,
1999, which is the date the property was sold.
(5) Represents the total of property operating expenses divided by
property operating revenues expressed as a percentage.
Our 1999 same-property operating performance, when compared to 1998,
includes a 4.2% increase in operating revenues, a 5.6% increase in net
operating income, a 0.6% decrease in average occupancy from 95.5% to 94.9%, and
a 3.6% decline in our lease renewal percentage. Same-property results for the
seven communities that were fully stabilized during both years ended December
31, 1999 and 1998 (Crestmark, Highland Park, Ivey Brook, River Oaks, Rosewood
Plantation, and the first phases of Plantation Trace, and Preston Oaks) are
summarized in the table below.
Our 1998 same-property operating performance, when compared to 1997,
includes a 4.6% increase in operating revenues, a 1.0% increase in net
operating income, a 2.0% increase in average occupancy from 94.2% to 96.2%, and
a 4.0% increase in our lease renewal percentage. Same-property results for the
seven communities that were fully stabilized during both years ended December
31, 1998 and 1997 (Bentley Place, Highland Park, River Oaks, Rosewood
Plantation, and the first phases of Crestmark, Plantation Trace, and Preston
Oaks) are summarized in the following table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
(dollars in thousands) ----------------------------------- -------------------------------------
% %
1999 1998 CHANGE 1998 1997 CHANGE
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Rental income $14,441 $14,149 2.1% $12,817 $12,239 4.7%
Total operating revenues $15,402 $14,785 4.2% $13,267 $12,678 4.6%
Property operating expenses (1) $ 5,255 $ 5,180 1.4% $ 4,702 $ 4,194 12.1%
Management fees paid to related party (2) $ 0 $ 0 0.0% $ 0 $ 160 (100.0%)
Net operating income (3) $10,147 $ 9,605 5.6% $ 8,565 $ 8,484 1.0%
Average stabilized occupancy (4) 94.9% 95.5% (0.6%) 96.2% 94.2% 2.0%
Operating expense ratio (5) 34.1% 35.0% (0.9%) 35.4% 33.1% 2.3%
Average monthly rent per apartment home $ 920 $ 895 2.8% $ 879 $ 856 2.7%
Lease renewal percentage (6) 55.7% 59.3% (3.6%) 62.6% 58.6% 4.0%
</TABLE>
(1) Property operating expenses include personnel, utilities, real
estate taxes, insurance, maintenance, landscaping, marketing, and
property administration expenses (real estate taxes excludes an
adjustment of $588,000 in 1997 to reduce estimated property tax
accruals for two properties that received favorable tax
assessments).
(2) Because we acquired Roberts Management on April 1, 1997, we paid no
management fees to a related party after March 31, 1997; however, we
incurred additional general and administrative expenses as a result
of managing our properties internally.
(3) Net operating income is equal to total operating revenues minus
property operating expenses.
(4) Represents the average physical occupancy of the stabilized
communities calculated by dividing the total number of vacant days
by the total possible number of vacant days for each period and
subtracting the resulting number from 100%.
(5) Represents the total of property operating expenses divided by
property operating revenues expressed as a percentage.
29
<PAGE> 31
6) Represents the number of leases renewed divided by the number of
leases expired during the period presented, expressed as a
percentage.
The following discussion compares our statements of operations for
the years ended December 31, 1999, 1998 and 1997.
Property operating revenue increased $2,030,000 or 11.7% from
$17,354,000 for the year ended December 31, 1998 to $19,384,000 for the year
ended December 31, 1999. The increase in operating revenue is due primarily to
the following:
(a) the start of leasing operations at Addison Place Phase I in
April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek
in August 1998 and the second phases of Preston Oaks in July
1998 and Plantation Trace in November 1998;
(c) a $617,000 or 4.2% increase in same-property operating
revenue; and
(d) a $307,000 increase in water revenue from $50,000 in 1998 to
$357,000 in 1999; $255,000 of the $307,000 increase is
attributable to the seven properties that were stabilized
during both 1998 and 1999;
offset by:
(e) the sale of the two retail centers in 1998 compared to the
sale of Bentley Place in 1999; and
(f) decreased average physical occupancy from 96.3% in 1998 to
93.7% in 1999.
Property operating revenue decreased $218,000 or 1.2% from $17,572,000
for the year ended December 31, 1997 to $17,354,000 for the year ended December
31, 1998. The decrease in operating revenue is due primarily to the following:
(a) the sales of Autumn Ridge in August 1997, Windsong in January
1998, and the two retail centers in July 1998;
offset by:
(b) a 4.6% increase in same-property revenue, which is due to an
increase in occupancy from 94.2% to 96.2% along with a 2.7%
increase in the average monthly rent per apartment home from
$856 to $879 per month; and
(c) the lease-up of Bradford Creek and the second phases of
Preston Oaks and Plantation Trace during 1998.
During 1998, we implemented a program to bill residents for their
individual water consumption. We completed the installation of water-metering
equipment in the fourth quarter of 1998 at a total cost of $377,000. Water
revenues were $50,000 during 1998 and $357,000 during 1999. We expect to
install water-metering equipment in all new apartment homes we develop.
Property operating expenses (excluding depreciation and general and
administrative expenses) increased $496,000 or 8.0% from $6,192,000 for the
year ended December 31, 1998 to $6,688,000 for the year ended December 31,
1999. The increase in property operating expenses is due primarily to the
following:
(a) the start of leasing operations at Addison Place Phase I in
April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek
in August 1998 and the second phases of Preston Oaks in July
1998 and Plantation Trace in November 1998;
30
<PAGE> 32
(c) a $75,000, or 1.4% increase in same-property operating
expenses;
offset by:
(d) the sales of Bentley Place in 1999 and the two retail centers
in 1998.
Property operating expenses (excluding depreciation, general and
administrative expenses, management fees, and a $588,000 favorable real estate
tax adjustment) increased $100,000 or 1.6% from $6,092,000 for the year ended
December 31, 1997 to $6,192,000 for the year ended December 31, 1998. The
increase in property operating expenses is due primarily to the following:
(a) the sales of Autumn Ridge in August 1997, and Windsong in
January 1998 and the two retail centers in July 1998;
offset by:
(b) the start of property operations at Bradford Creek and the
second phases of Preston Oaks and Plantation Trace, all of
which were first leased-up in 1998; and
(c) a 12.1% increase in same-property expenses due primarily to
higher personnel and maintenance costs.
General and administrative expenses increased $237,000 or 13.7% from
$1,727,000 for the year ended December 31, 1998 to $1,964,000 for the year
ended December 31, 1999 and include legal, accounting and tax fees, marketing
and printing fees, salaries, director fees and other costs. The increase is due
primarily to increased personnel costs including amortization of restricted
stock, accounting and tax fees related to the registration statement we filed
with the SEC that became effective in August 1999, expenses of SEC and other
shareholder reports, marketing, and directors fees. General and administrative
expenses as a percentage of operating revenues increased from 10.0% for the
year ended December 31, 1998 to 10.1% for the year ended December 31, 1999.
General and administrative expenses increased $13,000 or 0.8% from
$1,714,000 for the year ended December 31, 1997 to $1,727,000 for the year
ended December 31, 1998. The increase is due primarily to increased personnel
costs due to the acquisition of Roberts Management, offset by a reduction in
accounting and tax fees, legal, and marketing fees, and the initial fee paid to
list our common stock on the American Stock Exchange. General and
administrative expenses as a percentage of operating revenues increased from
9.8% for the year ended December 31, 1997 to 10.0% for the year ended December
31, 1998.
Depreciation expense increased $512,000 or 10.2% from $5,017,000 for
the year ended December 31, 1998 to $5,529,000 for the year ended December 31,
1999. The increase is due primarily to the completion of construction of
Bradford Creek and the second phases of Preston Oaks and Plantation Trace in
1998 and the completion of construction of the first phase of Addison Place in
1999, offset by the sale of the two retail centers in 1998 and the sale of
Bentley Place in 1999.
Depreciation expense decreased $691,000 or 12.1% from $5,708,000 for
the year ended December 31, 1997 to $5,017,000 for the year ended December 31,
1998. The decrease is due primarily to the sales of Autumn Ridge in 1997 and
Windsong in 1998, offset by depreciation from the communities leased-up in 1998
(because depreciation expense is recorded as apartment homes are completed and
available for occupancy).
On April 1, 1997, we acquired Roberts Management, the property
management company that had managed our multifamily apartment communities since
our inception. Because Roberts Management, a related party, managed only the
properties we owned, we accounted for the transaction as the settlement of a
contract and showed it as an expense for the year ended December 31, 1997.
Interest expense increased $689,000 or 15.1% from $4,555,000 for the
year ended December 31, 1998 to $5,244,000 for the year ended December 31,
1999. The increase is due primarily to:
(1) the financing of Bradford Creek in June 1998 and the first
phase of Addison Place in October 1999,
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<PAGE> 33
(2) the refinancing of the mortgage loan secured by the Rosewood
Plantation community in June 1998 for a higher loan amount,
and
(3) the refinancing of the mortgage loans secured by the
Plantation Trace and Crestmark communities in September 1998,
each for higher loan amounts, offset by the mortgage note
that we repaid when we sold Bentley Place in 1999.
Interest expense decreased $115,000 or 2.5% from $4,670,000 for the
year ended December 31, 1997 to $4,555,000 for the year ended December 31,
1998. The decrease is due primarily to the mortgage notes that we repaid when
we sold Autumn Ridge in 1997 and Windsong in 1998, offset by:
(1) the financing of Ivey Brook, the second phase of Crestmark,
and Bradford Creek in January 1997, July 1997, and June 1998,
respectively,
(2) the refinancing of the mortgage loan secured by the Rosewood
Plantation community in June 1998 for a higher loan amount,
and
(3) the refinancing of the mortgage loans secured by the
Plantation Trace and Crestmark communities in September 1998,
each for higher loan amounts.
On August 26, 1997, we completed the sale of the 207-unit Autumn Ridge
community for $10,601,000 in cash. The sale resulted in a gain, net of minority
interest, of $1,012,000. Net sales proceeds were $5,045,000 after deduction for
loan repayment, closing costs and prorations. The purchaser, Benchmark Autumn
Ridge Associates, L.P., is not affiliated with us, and the transaction was
negotiated at arms-length. We paid Roberts Properties a consulting fee of
$150,000 at closing.
On January 9, 1998, we completed the sale of the Windsong community
for $9,750,000 in cash resulting in a gain, net of minority interest, of
$918,000 on the sale of real estate assets. Net sales proceeds were $5,194,000
after deduction for loan repayment of $3,959,000, closing costs of $458,000,
and prorations of $139,000. We paid Roberts Properties a consulting fee of
$288,000 at closing. We reinvested the net cash proceeds from the sale of
Windsong in undeveloped land in June 1998 as part of a Section 1031
tax-deferred exchange.
On July 17, 1998, we completed the sale of two retail centers for
$2,400,000 in cash resulting in a gain, net of minority interest, of $300,000.
Net sales proceeds were $2,182,000, after deducting for closing costs of
$183,000 and prorations of $35,000. We paid Roberts Properties a consulting fee
of $92,500 at closing.
On August 23, 1999, we sold the Bentley Place community for $8,273,000
in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales
proceeds were $3,726,000 after deduction for loan repayment, including
prepayment fee, of $4,166,000, and closing costs, accrued interest, and
prorations totaling $381,000. Partnership profits interests of $242,000 were
paid to Roberts Properties under the amended partnership agreement of the
operating partnership. We used the remaining net sales proceeds of $3,484,000
to fund a special distribution to shareholders and unitholders on August 30,
1999. Unamortized loan cost of $93,000 and a prepayment fee of $198,000 payable
at closing were charged to expense as an extraordinary item. The extraordinary
item (early extinguishment of debt) for the year ended December 31, 1999 was
$291,000 (including the minority interests' share of $107,000).
We refinanced the mortgage notes payable secured by the Rosewood
Plantation and Crestmark communities in June and September 1998, respectively,
before their contractual maturity. We charged the yield maintenance fee and the
unamortized loan costs related to the mortgage notes payable at the time of the
refinancing to expense as an extraordinary item. The extraordinary item (early
extinguishment of debt), including the extraordinary gain of $110,000 on the
buyer's assumption of debt related to the sale of Windsong, for the year ended
December 31, 1998 was $792,000 (including the minority interests' share of
$305,000).
We repaid the mortgage note payable secured by Autumn Ridge in full at
the closing of the sale of Autumn Ridge in August 1997, before its contractual
maturity. We charged unamortized loan costs of $73,000 and a yield maintenance
fee of $252,000 payable at the closing of the sale to expense as an
extraordinary item. The extraordinary item (early extinguishment of debt) for
the year ended December 31, 1997 was $325,000 (including the minority
interests' share of $141,000).
32
<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Years Ended December 31, 1999, 1998 and 1997. Cash and
cash equivalents decreased $2,433,000 from $4,106,000 as of December 31, 1998
to $1,673,000 as of December 31, 1999. The decrease was due to a decrease in
cash provided by financing activities, offset by an decrease in cash used in
investing activities and an increase in cash provided by operating activities.
Cash and cash equivalents decreased $3,011,000 from $7,117,000 as of December
31, 1997 to $4,106,000 as of December 31, 1998. The decrease was due to an
increase in cash used in investing activities and a decrease in cash provided
by operating activities, offset by an increase in cash provided by financing
activities.
A primary source of liquidity for us is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses with respect to those
apartment homes. Net cash provided by operating activities increased $622,000
from $5,295,000 during 1998 to $5,917,000 during 1999. The increase in cash
flow from operations is due primarily to additional cash flow from the
communities leased-up in 1998 and the commencement of leasing operations at the
first phase of Addison Place in 1999, offset by the sales of the two retail
centers in 1998, and Bentley Place in 1999. Net cash provided by operating
activities decreased $174,000 from $5,469,000 during 1997 to $5,295,000 during
1998. The decrease in cash flow from operations is due primarily to the sales
of Autumn Ridge and Windsong, offset by additional cash flow from the
communities leased-up in 1998. Generally, depreciation and amortization
expenses are the most significant adjustments to net income (loss) in arriving
at cash provided by operating activities.
Net cash used in investing activities decreased $11,232,000 from
$18,235,000 during 1998 to $7,003,000 during 1999. This decrease is due
primarily to the following:
(a) the purchase of three separate parcels of land for $11,359,000
in 1998; and
(b) construction costs of $12,915,000 in 1999 related to the
first and second phases of Addison Place, Bradford Creek, and
the second phase of Plantation Trace, compared to
construction costs of $13,913,000 in 1998 related to Bradford
Creek, the second phases of Preston Oaks and Plantation
Trace, and the first phase of Addison Place;
offset by:
(c) proceeds of $7,918,000 from the sale of Bentley Place in 1999
compared to proceeds of $7,521,000 in 1998 in from the sales
of Windsong and the two retail centers.
Net cash used in investing activities increased $16,698,000 from
$1,537,000 during 1997 to $18,235,000 during 1998. This increase is due
primarily to the following:
(a) the purchase of three separate parcels of land for $11,359,000
in 1998; and
(b) construction costs of $13,913,000 in 1998 related to Bradford
Creek, the second phases of Preston Oaks and Plantation
Trace, and the first phase of Abbotts Bridge, compared to
construction costs totaling $10,519,000 in 1997 related to
Ivey Brook, the second phase of Crestmark, and the start of
construction at Bradford Creek;
offset by:
(c) proceeds totaling $7,521,000 in 1998 from the sales of
Windsong and the two retail centers compared to proceeds of
$10,330,000 from the sale of Autumn Ridge in 1997.
Net cash provided by (used in) financing activities decreased
$11,276,000 from $9,929,000 of net cash provided in 1998 to $1,347,000 of net
cash used during 1999. This decrease is due primarily to the following:
33
<PAGE> 35
(a) the closing of a $9,500,000 loan in October 1999 on Addison
Place Phase I with a fixed interest rate of 6.95% per annum
and a term of ten years, which provided net cash proceeds of
$1,321,000 after paying off the construction loan
($8,019,000) and accrued interest ($38,000); the $1,321,000
net proceeds will be used to pay the balance of construction
costs; the lender required us to obtain a letter of credit in
the amount of $843,000 until the property obtains 95%
physical occupancy (at December 31, 1999, the physical
occupancy of the property was 55.9%.);
(b) the closing of a $3,000,000 land loan secured by Addison
Place Phase II with a variable interest rate of LIBOR plus
150 basis points, a one-year term, which provided net cash
proceeds of $2,977,000; the proceeds will be used to fund the
initial construction of the second phase of Addison Place;
(c) net borrowings of $1,235,000 from the $2,000,000 line of
credit;
offset by:
(d) the closing of an $8,400,000 loan in June 1998 on Bradford
Creek with a fixed interest rate of 7.15% per annum and a
term of ten years, which provided net cash proceeds of
$8,282,000;
(e) the refinancing of a $6,317,000 loan on Rosewood Plantation
in June 1998 for $8,100,000 with a fixed interest rate of
6.62% per annum (compared with 7.38% per annum on the old
loan), a term of ten years, which provided net cash proceeds
of $1,474,000;
(f) the refinancing of a $7,686,000 loan on Plantation Trace in
September 1998 for $11,900,000 (which included the 50-unit
second phase of Plantation Trace), with a fixed interest rate
of 7.09% per annum (compared with 7.75% per annum on the old
loan), a term of ten years, which provided net cash proceeds
of $3,092,000; an additional $150,000 was escrowed by lender
until completion of construction of the additional amenities,
which occurred during the second quarter of 1999;
(g) the refinancing of two loans totaling $13,520,000 on Crestmark
in September 1998; the new loan amount is $16,000,000 with a
fixed interest rate of 6.57% per annum (compared with 7.54%
per annum on the old loans), a term of ten years, and net
cash proceeds of $1,680,000; and
(h) an increase of $3,826,000 in dividends and distributions paid,
from $4,322,000 during 1998 to $8,148,000 during 1999.
Net cash provided by financing activities increased $9,906,000 from
$23,000 during 1997 to $9,929,000 during 1998. This increase is due primarily
to the following:
(a) the closing of an $8,400,000 loan in June 1998 on Bradford
Creek with a fixed interest rate of 7.15% per annum and a
term of ten years, which provided net cash proceeds of
$8,282,000;
(b) the refinancing of an existing $6,317,000 loan on Rosewood
Plantation in June 1998 for $8,100,000 with a fixed interest
rate of 6.62% per annum (compared with 7.38% per annum on the
old loan) and a term of ten years, which provided net cash
proceeds of $1,474,000;
(c) the refinancing of an existing $7,686,000 loan on Plantation
Trace in September 1998 for $11,900,000 (which included the
50-unit second phase of Plantation Trace), with a fixed
interest rate of 7.09% per annum (compared with 7.75% per
annum on the old loan) and a term of ten years, which
provided net cash proceeds of $3,092,000; an additional
$150,000 was escrowed by lender until completion of
construction of the additional amenities, which occurred
during the second quarter of 1999;
(d) the refinancing of two existing loans totaling $13,520,000 on
Crestmark in September 1998; the new loan amount is
$16,000,000 with a fixed interest rate of 6.57% per annum
(compared with 7.54% per annum on the old loans) and a term
of ten years, which provided net cash proceeds of $1,680,000;
and
34
<PAGE> 36
(e) an increase of $234,000 in dividends and distributions paid,
from $4,088,000 during 1997 to $4,322,000 during 1998;
offset by:
(f) the permanent financing of Ivey Brook in January 1997 that
resulted in net cash proceeds of $6,270,000;
(g) the permanent financing of the second phase of Crestmark in
July 1997 that resulted in net cash proceeds of $3,905,000;
and
(h) the payoff of a $4,899,000 mortgage loan in August 1997 from
the proceeds of the sale of Autumn Ridge.
Existing Debt Structure. The following facts highlight our existing
debt structure:
(a) each of our nine communities is financed with fixed-rate debt;
(b) the average interest rate for all nine communities is 6.98%
per annum as of December 31, 1999;
(c) no debt is scheduled to mature before October 2002;
(d) the average term to maturity is eight years; and
(e) debt principal will amortize at a rate of approximately
$927,000 per year.
The following table summarizes the debt for each of our nine
communities:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL
RATE AS OF OUTSTANDING
12/31/99 MATURITY 12/31/99
-------------- --------- ------------
<S> <C> <C> <C>
Addison Place Phase I 6.95% 11/15/09 $ 9,500,000
Bradford Creek 7.15% 06/15/08 8,273,000
Crestmark 6.57% 10/01/08 15,778,000
Highland Park 7.30% 02/15/03 7,844,000
Ivey Brook 7.14% 02/15/07 6,228,000
Plantation Trace 7.09% 10/15/08 11,760,000
Preston Oaks 7.21% 10/15/02 8,313,000
River Oaks 7.15% 11/15/03 8,946,000
Rosewood Plantation 6.62% 07/15/08 7,973,000
---------
$ 84,615,000
==============
</TABLE>
35
<PAGE> 37
Each of our existing mortgage loans will require balloon payments (in
addition to monthly principal amortization) coming due over the years 2002 to
2009 as summarized below:
<TABLE>
<CAPTION>
<S> <C>
2002 $ 8,025,000
2003 16,057,000
2007 5,570,000
2008 38,232,000
2009 8,387,000
---------
Total $ 76,271,000
==============
</TABLE>
Because we anticipate that only a small portion of the principal of
that indebtedness will be repaid before maturity and that we will not have
funds on hand sufficient to repay that indebtedness, it will be necessary for
us to refinance that debt through (a) debt financing collateralized by
mortgages on individual communities or groups of communities and/or (b) equity
offerings.
During the quarter ended December 31, 1999, we completed construction
on the 118-unit Addison Place Phase I, located in north Atlanta. We funded
Phase I with the proceeds from mortgage loan financings, operating cash, and a
$9,500,000 construction loan. We repaid the $8,019,000 outstanding on the
construction loan plus accrued interest of $38,000 upon closing a $9,500,000
permanent loan secured by Addison Place Phase I on October 25, 1999. We will
use the balance of the proceeds to pay the remaining construction costs.
Because the property was less than 95% occupied at closing, the lender required
us to obtain an $843,000 letter of credit secured by an equal amount of cash.
The permanent loan includes a 10-year term with a fixed interest rate of 6.95%
payable in monthly installments of $62,885 based on a 30-year amortization
schedule. The first 12 payments are interest-only payments of $55,021 per
month.
During the quarter ended June 30, 1999, we started construction on
Addison Place Phase II. Phase II will consist of 285 apartment homes, and we
expect occupancy to begin in the third quarter of 2000. We began construction
on a 319-unit community in Charlotte during the fourth quarter of 1999 and
expect to start construction of a 249-unit community located in north Atlanta
in the second quarter of 2000. We paid cash for the land for these three new
communities, and we expect to fund the cost of construction with construction
loans. We are in the process of obtaining construction loans, and we do not
expect to begin substantial construction until construction loans are secured.
We obtained a $2,000,000 revolving line of credit in June 1999 to
provide funds for short-term working capital purposes. The line has a one-year
term and bears an interest rate of LIBOR + 150 basis points. At December 31,
1999, $1,235,000 was outstanding under the line.
We and some of our non-owned affiliates have a $35,000,000 advised
guidance line with Bank of America, N.A. for the purpose of providing financing
for the acquisition or development of multifamily communities. Financing under
the guidance line is available on a revolving basis and bears interest at LIBOR
plus 1.80% or the prime rate, at our option, payable monthly. The guidance line
is not a commitment to lend, and each loan under the guidance line will be made
at Bank of America's discretion in accordance with normal loan approval
procedures. At December 31, 1999, no amount was outstanding under the guidance
line.
We anticipate that each community's rental and other operating
revenues will be adequate to provide short-term (less than 12 months) liquidity
for the payment of direct rental operating expenses, interest and amortization
of principal on related mortgage notes payable and capital expenditures. We
expect to meet our other short-term liquidity requirements generally through
our net cash provided by operations, which we believe will be adequate to meet
our operating requirements in both the short term and in the long term (greater
than 12 months). We also expect to fund improvements and renovations at
existing communities from property operations. We expect to meet our long-term
liquidity requirements, including future developments and debt maturities, from
the proceeds of construction and permanent loans.
36
<PAGE> 38
STOCK REPURCHASE PLAN
On September 3, 1998, we issued a press release announcing that our
board of directors had authorized the repurchase of up to 300,000 shares of our
outstanding common stock. We intend to repurchase our shares from time to time
by means of open market purchases depending on availability, our cash position
and price per share. We repurchased 121,200 shares in 1999 at a total cost of
$909,000. From October 1, 1998 through December 31, 1999, we repurchased
140,500 shares for $1,054,000.
REDEMPTIONS OF UNITS FOR CASH
During the year ended December 31, 1999, we paid $28,000 to redeem
3,917 units from unitholders who resided outside the state of Georgia. From
June 1, 1998 through February 3, 1999, we paid $150,000 to redeem 18,258 units
from unitholders who resided outside the state of Georgia.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
Funds from Operations, or FFO, is defined by the National Association
of Real Estate Investment Trusts as net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains (or losses) from
debt restructuring and sales of property and non-recurring items, plus real
estate related depreciation and amortization. We compute FFO in accordance with
the current NAREIT definition, which may differ from the methodology for
calculating FFO utilized by other equity REITs and, accordingly, may not be
comparable to those other REITs. FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, property acquisitions, development and
distributions, or other commitments and uncertainties. FFO should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of our financial performance or cash flows from operating
activities (determined in accordance with GAAP) as a measure of our liquidity,
nor is it indicative of funds available to fund our cash needs, including our
ability to make distributions. We consider FFO to be an important measure of
our operating performance. While FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP, FFO does
provide investors with additional information with which to evaluate the
ability of a REIT to pay dividends, meet required debt service payments and
fund capital expenditures. We believe that to gain a clear understanding of our
operating results, FFO should be evaluated in conjunction with net income
(determined in accordance with GAAP). FFO represents funds from operations
available for Shareholders and unitholders. The following table reconciles net
income (loss) to FFO (dollars in thousands).
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) $ 716 $ 708 $ (2,609)
Minority interest of unitholders in the operating partnership (70) (15) (2,646)
Extraordinary item 184 487 184
Amortization (real estate related) 0 41 65
Acquisition of Roberts Management 0 0 5,900
Loss on disposal of real estate - related assets 81 94 156
Gain on sale of real estate assets (1,023) (1,218) (1,012)
Depreciation expense 5,529 5,017 5,708
--------- --------- ---------
Funds From Operations $ 5,417 $ 5,114 $ 5,746
========= ========= =========
Weighted average shares and units
outstanding during the period 7,448,757 7,547,978 7,404,323
</TABLE>
37
<PAGE> 39
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
standards for reporting and display of derivative instruments, hedges and their
components. We will be required to adopt SFAS 133, amended by SFAS 137, on
January 1, 2001. As of December 31, 1999, we had no derivative instruments or
hedging activities and, therefore, we do not expect this statement to have a
material effect on our financial position and results of operations.
INFLATION
Substantially all apartment leases are for an initial term of not more
than 12 months and thus may enable us to seek increases in rents after the
expiration of each lease. The short-term nature of these leases serves to
reduce the risk to us of the adverse effects of inflation.
YEAR 2000 COMPUTER ISSUES
The "Year 2000 problem" is a general term used to identify those
computer programs or applications that are programmed to use a two-digit field,
instead of a four-digit field, for the year component of a date. Those programs
or applications which are programmed in this manner may recognize the year 2000
as the year 1900, thereby causing potential system failures or miscalculations,
which could result in disruptions of normal business operations. We have
experienced no problems in either our accounting or property management systems
as a result of the year 2000, and amounts expensed to remedy year 2000 issues
were not material.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934. These statements appear in a number of places in this report and
include all statements that are not historical facts. Some of the
forward-looking statements relate to our intent, belief or expectations
regarding our strategies and plans for operations and growth, including
development and construction of new multifamily apartment communities in our
existing markets and elsewhere in the Southeast. Other forward-looking
statements relate to trends affecting our financial condition and results of
operations, and our anticipated capital needs and expenditures. These
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and actual results may differ materially from those
that are anticipated in the forward-looking statements. These risks include the
following:
- Unfavorable changes in market and economic conditions in Atlanta
and Charlotte could hurt our occupancy and rental rates.
- Increased competition in the Atlanta and Charlotte markets could
limit our ability to lease our apartments homes or increase or
maintain rents.
- Conflicts of interest inherent in business transactions between
or among Roberts Realty and/or the operating partnership on one
hand, and Mr. Roberts and/or his affiliates on the other hand,
could result in our paying more for property or services than we
would pay an independent seller or provider.
- Construction and lease-up risks inherent in our development of
the Addison Place, Ballantyne and Old Norcross communities, and
the other communities we may develop in the future, could
adversely affect our financial performance.
- We might not be able to obtain replacement financing to make
balloon payments on our fixed-rate debt, or we might have to
refinance our debt on less favorable terms.
- Because our organizational documents do not limit the amount of
debt we may incur, we could increase the amount of our debt as a
percentage of the estimated value of our properties.
- Our operations could be adversely affected if we lost key
personnel, particularly Mr. Roberts.
- We could incur costs from environmental problems even though we
did not cause, contribute to or know about them.
38
<PAGE> 40
- Compliance or failure to comply with the Americans with
Disabilities Act and other similar laws could result in
substantial costs.
In addition, the market price of the common stock may from time to time
fluctuate widely as a result of, among other things:
- our operating results;
- the operating results of other REITs, particularly apartment
REITs; and
- changes in the performance of the stock market in
general.
Investors should review the more detailed description of these and other
possible risks contained in the "Risk Factors" section of the prospectus
included in the S-3 Registration Statement filed on August 2, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk from changes in interest rates, which may
adversely affect our financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, we manage
exposures through our regular operating and financing activities. We do not use
financial instruments for trading or other speculative purposes. We are exposed
to interest rate risk primarily through our borrowing activities, which are
described in Note 4 to the Consolidated Financial Statements. All of our
long-term borrowings are under fixed rate instruments, and our line of credit
rate and land loan rates are 150 basis points over the three-month LIBOR. We
have determined that there is no material market risk exposure to our
consolidated financial position, results of operations or cash flows.
The table below presents principal reductions and related weighted average
interest rates by year of expected maturity for our debt obligations.
<TABLE>
<CAPTION>
FAIR VALUE
DECEMBER 31,
(DOLLARS IN THOUSANDS) 2000 2001 2002 2003 2004 THEREAFTER TOTAL 2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal reductions in
mortgage notes $ 927 $1,084 $9,105 $16,922 $893 $55,684 $84,615 $84,615
Average interest rates 6.98% 6.98% 6.96% 6.88% 6.88% 6.85% 6.99% 6.99%
Principal reductions in $1,235 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,235 $ 1,235
line of credit
Principal reductions in $3,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 3,000 $ 3,000
land loan
</TABLE>
39
<PAGE> 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements are listed under Item 14(a) and are filed as part of
this annual report on the pages indicated.
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants (Arthur Andersen LLP).......................F-1
Consolidated Financial Statements and Schedule as of
December 31, 1999 and 1998 and for the Years Ended
December 31, 1999, 1998 and 1997:
Balance Sheets.......................................................................F-2
Statements of Operations.............................................................F-3
Statements of Shareholders' Equity...................................................F-4
Statements of Cash Flows.............................................................F-5
Notes to Financial Statements .......................................................F-6
Schedule III - Real Estate and Accumulated Depreciation..............................S-1
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
As permitted by applicable rules of the SEC, some information required
by Part III is omitted from this report because we will file a definitive proxy
statement for our 2000 annual shareholders meeting under Regulation 14A not
later than April 30, 2000.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is incorporated by reference
from our definitive proxy statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference
from our definitive proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference
from our definitive proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference
from our definitive proxy statement.
40
<PAGE> 42
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. and 2. Financial Statements and Schedules.
The financial statements and schedules listed below are filed as part
of this annual report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (Arthur Andersen LLP).........................................................F-1
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 1999 AND 1998
AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996:
Balance Sheets.......................................................................................F-2
Statements of Operations.............................................................................F-3
Statements of Shareholders' Equity...................................................................F-4
Statements of Cash Flows.............................................................................F-5
Notes to Financial Statements........................................................................F-6
Schedule III - Real Estate and Accumulated Depreciation..............................................S-1
</TABLE>
41
<PAGE> 43
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Roberts Realty Investors, Inc.:
We have audited the accompanying consolidated balance sheets of Roberts Realty
Investors, Inc. (a Georgia corporation) and its subsidiary as of December 31,
1999 and 1998 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roberts Realty Investors, Inc.
and its subsidiary as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 25, 2000
F-1
<PAGE> 44
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
ASSETS 1999 1998
--------- ---------
<S> <C> <C>
REAL ESTATE ASSETS - At cost:
Land $ 21,120 $ 20,239
Buildings and improvements 96,124 91,407
Furniture, fixtures and equipment 11,654 11,184
--------- ---------
128,898 122,830
Less accumulated depreciation (21,029) (16,914)
--------- ---------
Operating real estate assets 107,869 105,916
Land held for future development 2,559 6,065
Construction in progress and real estate under development 12,393 7,035
--------- ---------
Net real estate assets 122,821 119,016
CASH AND CASH EQUIVALENTS 1,673 4,106
RESTRICTED CASH 1,202 470
DEFERRED FINANCING COSTS - Net of accumulated amortization of
$425 and $246 at December 31, 1999 and, 1998, respectively 1,031 1,095
OTHER ASSETS - Net 351 403
--------- ---------
$ 127,078 $ 125,090
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 84,615 $ 79,973
Land note payable 3,000 0
Line of credit 1,235 0
Accounts payable and accrued expenses 1,238 1,187
Dividends and distributions payable 1,010 1,092
Due to affiliates (including retainage payable of $216 and $0 at
December 31, 1999 and 1998, respectively) 1,214 398
Security deposits and prepaid rents 443 335
--------- ---------
Total liabilities 92,755 82,985
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP 12,013 15,579
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, 20,000,000 shares authorized, no shares
issued and outstanding -- --
Common shares, $.01 par value, 100,000,000 shares authorized, 4,959,697 and
4,764,037 shares issued at December 31, 1999 and 1998, respectively 49 47
Additional paid-in capital 25,354 29,335
Less treasury shares, at cost (140,500 shares and 19,300 shares at
December 31, 1999 and 1998, respectively) (1,054) (145)
Unamortized deferred compensation (136) (92)
Accumulated deficit (1,903) (2,619)
--------- ---------
Total shareholders' equity 22,310 26,526
--------- ---------
$ 127,078 $ 125,090
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 45
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES:
Rental operations $ 18,163 $ 16,521 $ 16,831
Other operating income 1,221 833 741
----------- ----------- -----------
Total operating revenues 19,384 17,354 17,572
----------- ----------- -----------
OPERATING EXPENSES:
Personnel 1,785 1,777 1,661
Utilities 1,301 1,178 1,194
Repairs, maintenance and landscaping 1,180 1,090 1,124
Real estate taxes 1,574 1,393 724
Management fees to related party 0 0 211
Marketing, insurance and other 848 754 801
General and administrative expenses 1,964 1,727 1,714
Depreciation expense 5,529 5,017 5,708
----------- ----------- -----------
Total operating expenses 14,181 12,936 13,137
----------- ----------- -----------
INCOME FROM OPERATIONS 5,203 4,418 4,435
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Acquisition of Roberts Properties Management, L.L.C 0 0 (5,900)
Interest income 159 384 395
Interest expense (5,244) (4,555) (4,670)
Loss on disposal of assets (81) (94) (156)
Amortization of deferred financing costs (219) (139) (122)
Other amortization expense (11) (52) (65)
----------- ----------- -----------
Total other expense (5,396) (4,456) (10,518)
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST, GAINS ON SALE OF
REAL ESTATE ASSETS AND EXTRAORDINARY ITEMS (193) (38) (6,083)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP 70 15 2,646
----------- ----------- -----------
LOSS BEFORE GAINS ON SALE OF REAL ESTATE ASSETS
AND EXTRAORDINARY ITEMS (123) (23) (3,437)
GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
of unitholders in the operating partnership 1,023 1,218 1,012
----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 900 1,195 (2,425)
EXTRAORDINARY ITEMS - Loss on early extinguishment of debt, net of
minority interest of unitholders in the operating partnership (184) (487) (184)
----------- ----------- -----------
NET INCOME (LOSS) $ 716 $ 708 $ (2,609)
=========== =========== ===========
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary items $ 0.19 $ 0.26 $ (0.58)
Extraordinary items (0.04) (0.11) (0.04)
----------- ----------- -----------
Net income (loss) $ 0.15 $ 0.15 $ (0.62)
=========== =========== ===========
Weighted average common shares - basic 4,737,008 4,638,265 4,187,013
Weighted average common shares - diluted 7,448,757 7,547,978 7,404,323
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 46
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
COMMON SHARES
-------------- ADDITIONAL TOTAL
NUMBER OF PAID-IN TREASURY DEFERRED ACCUMULATED SHAREHOLDERS'
SHARES ISSUED AMOUNT CAPITAL SHARES COMPENSATION DEFICIT EQUITY
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1996 4,186,329 $42 $29,902 $ 0 $ 0 $ (718) $29,226
Conversion of units to shares 234,179 2 1,410 1,412
Dividends declared ($0.576 per share) (2,444) (2,444)
Adjustment for minority interest in
the operating partnership 1,112 1,112
Net loss (2,609) (2,609)
----------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1997 4,420,508 44 29,980 0 0 (3,327) 26,697
Conversion of units to shares 330,468 3 2,002 2,005
Dividends declared ($0.5775 per share) (2,702) (2,702)
Adjustment for minority interest in
the operating partnership 66 66
Repurchase of units (122) (122)
Restricted shares issued to employees 13,061 111 (111) 0
Amortization of deferred compensation 19 19
Treasury shares (19,300 shares at cost) (145) (145)
Net income 708 708
-----------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1998 4,764,037 47 29,335 (145) (92) (2,619) 26,526
Conversion of units to shares 185,858 2 955 957
Dividends declared ($1.085 per share) (5,134) (5,134)
Adjustment for minority interest in
the operating partnership 147 147
Repurchase of units (28) (28)
Restricted shares issued to employees 9,802 79 (79) 0
Amortization of deferred compensation 35 35
Treasury shares (121,200 shares at cost) (909) (909)
Net income 716 716
----------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1999 4,959,697 $49 $25,354 ($1,054) $(136) $(1,903) $22,310
==================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 47
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 716 $ 708 $ (2,609)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Minority interest of unitholders in the operating partnership (70) (15) (2,646)
Gain on sale of real estate assets (1,023) (1,218) (1,012)
Loss on disposal of assets 81 94 156
Depreciation and amortization 5,759 5,208 5,895
Non-cash interest 0 0 (55)
Acquisition of Roberts Properties Management, L.L.C 0 0 5,900
Extraordinary items, net of minority interest of unitholders in the
operating partnership 184 487 184
Amortization of deferred compensation 35 19 0
Changes in assets and liabilities:
(Increase) Decrease in restricted cash (39) 148 64
(Increase) Decrease in other assets 52 (34) (15)
Increase (decrease) in accounts payable and accrued expenses
relating to operations 114 (23) (94)
Decrease in due to affiliates relating to operations 0 0 (251)
Increase (decrease) in security deposits and prepaid rent 108 (79) (48)
-------- -------- --------
Net cash provided by operating activities 5,917 5,295 5,469
-------- -------- --------
INVESTING ACTIVITIES:
Proceeds from sale of real estate assets 7,918 7,521 10,330
Acquisition and construction of real estate assets (14,921) (25,756) (11,867)
-------- -------- --------
Net cash used in investing activities (7,003) (18,235) (1,537)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 9,500 44,400 10,420
Proceeds from land note payable 3,000 0 0
Proceeds from mortgage notes payable held in escrow (693) (150) 0
Payoff of mortgage notes, including prepayment penalty (4,166) (28,291) (5,151)
Principal repayments on mortgage notes payable (890) (788) (913)
Payment of loan costs (248) (653) (245)
Proceeds from short-term loan 3,085 350 0
Payoff of short-term loan (1,850) (350) 0
Proceeds from construction loan 8,019 0 0
Payoff of construction loan (8,019) 0 0
Repurchase of units (28) (122) 0
Repurchase of treasury stock (909) (145) 0
Payment of dividends and distributions (8,148) (4,322) (4,088)
-------- -------- --------
Net cash (used in) provided by financing activities (1,347) 9,929 23
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,433) (3,011) 3,955
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,106 7,117 3,162
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,673 $ 4,106 $ 7,117
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 5,852 $ 5,079 $ 4,722
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 48
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), a Georgia corporation,
was formed July 22, 1994 to serve as a vehicle for investments in, and
ownership of, a professionally managed real estate portfolio of
multifamily apartment communities. The Company owns and operates
multifamily residential properties as a self-administered, self-managed
equity real estate investment trust (a "REIT"). All of the Company's
completed apartment homes are located in the Atlanta metropolitan area.
The Company conducts all of its operations and owns all of its assets
in and through Roberts Properties Residential, L.P., a Georgia limited
partnership (the "Operating Partnership"), of which the Company is the
sole general partner and had a 65.0% and 63.0% ownership interest at
December 31, 1999 and 1998, respectively. As the sole general partner
and owner of a majority interest of the Operating Partnership, the
Company controls the Operating Partnership.
The Company, as the general partner of the Operating Partnership, does
not hold any limited partner interests in the Operating Partnership.
Units of limited partnership interest ("Units") in the Operating
Partnership outstanding at December 31, 1999 and 1998 were 2,594,836
and 2,784,611, respectively. Units held by the minority interest as a
percentage of total Units and shares of common stock ("Shares") of the
Company outstanding were 35.0% and 37.0% at December 31, 1999 and 1998,
respectively. The minority interest percentage reflects the number of
Shares and Units outstanding and will change as additional Shares and
Units are issued.
Effective October 1, 1994, the Company began operations through a
business combination (the "Consolidation") of four limited partnerships
(the "Predecessors") sponsored by Charles S. Roberts, the Chairman,
President and Chief Executive Officer of the Company ("Mr. Roberts").
The Consolidation was accounted for as a reorganization of entities
under common ownership and control. As a result of the Consolidation,
the partners of the Predecessors received Shares and/or Units. Purchase
accounting has been applied to all acquisitions after the
Consolidation.
At December 31, 1999, the Company owned nine completed multifamily
apartment communities totaling 1,779 apartment homes in Atlanta, and an
additional 604 apartment homes were under construction (285 in Atlanta
and 319 in Charlotte). On August 23, 1999, the Company sold a 117-unit
apartment community located in Atlanta, Georgia. The Company also held
land under development on which it expects to develop 249 apartment
homes in Atlanta in 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying consolidated financial
statements include the consolidated accounts of the Company and the
Operating Partnership. All significant intercompany accounts and
transactions have been eliminated in consolidation. The financial
statements of the Company have been adjusted for the minority interest
of the unitholders in the Operating Partnership.
The minority interest of the Unitholders in the Operating Partnership
on the accompanying balance sheets is calculated based on the minority
interest ownership percentage multiplied by the Operating Partnership's
net assets (total assets less total liabilities). The minority interest
percentage reflects the number of Shares and Units outstanding and will
change as additional Shares and Units are issued. The minority interest
of the Unitholders in the earnings or loss of the Operating Partnership
on the accompanying statements of operations is calculated based on the
weighted average number of Units outstanding during the period, which
was 36.4%, 38.5% and
F-6
<PAGE> 49
43.5% for the years ended December 31, 1999, 1998 and 1997,
respectively. The minority interest of the Unitholders was $12,013,000
and $15,579,000 at December 31, 1999 and 1998, respectively.
Holders of Units generally have the right to require the Operating
Partnership to redeem their Units for Shares. Upon submittal of Units
for redemption, the Operating Partnership has the option either (a) to
acquire those Units in exchange for Shares, on a one-for-one basis, or
(b) to pay cash for those Units at their fair market value, based upon
the then current trading price of the Shares. The Operating Partnership
has adopted a policy that it will issue Shares in exchange for all
future Units submitted.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REAL ESTATE ASSETS AND DEPRECIATION. All real estate assets are to be
held and used and are recorded at depreciated cost less reductions for
impairment, if any. In identifying potential impairment, management
considers such factors as declines in a property's operating
performance or market value, a change in use, or adverse changes in
general market conditions. In determining whether an asset is impaired,
management estimates the future cash flows expected to be generated
from the asset's use and its eventual disposition. If the sum of these
estimated future cash flows on an undiscounted basis is less than the
asset's carrying cost, the asset is written down to its fair value.
None of the Company's real estate assets have required write-downs.
Expenditures directly related to the development, acquisition and
improvement of real estate assets are capitalized at cost as land,
buildings and improvements. Ordinary repairs and maintenance are
expensed as incurred. Major replacements and betterments are
capitalized and depreciated over their estimated useful lives.
Buildings are generally depreciated over 27.5 years. Land improvements
are depreciated over 15 years, and furniture, fixtures and equipment
are depreciated over 5 to 7 years.
REVENUE RECOGNITION. The Company leases its residential properties
under operating leases with terms generally one year or less. Rental
income is recognized when earned, which is not materially different
than revenue recognition on a straight-line basis.
CASH AND CASH EQUIVALENTS. All investments purchased with an original
maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH. Restricted cash consists of resident security deposits
($359,000) and monies restricted by lenders from proceeds on mortgage
financings ($843,000). Because the physical occupancy of Addison Place
phase I was less than 95%, the lender required the Company to obtain a
letter of credit in the amount of $843,000. The 1998 restricted cash
consists of resident security deposits ($320,000) and monies restricted
by lenders from proceeds on mortgage financings. See Note 4 - Notes
Payable.
DEFERRED FINANCING COSTS. Deferred financing costs include fees and
costs incurred to obtain financings and are amortized on the
straight-line method over the terms of the related debt.
INTEREST AND REAL ESTATE TAXES. Interest and real estate taxes incurred
during the construction period are capitalized and depreciated over the
estimated useful lives of the constructed assets. Interest capitalized
was $621,000, $580,000 and $388,000 for the years ended December 31,
1999, 1998, and 1997, respectively.
INCOME TAXES. The Company elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with
the taxable year ended December 31, 1994. As a result, the Company
generally will not be subject to federal and state income taxation at
the corporate level to the extent it distributes annually at least 95%
of its taxable income, as defined in the Code, to its shareholders and
satisfies certain other requirements. Accordingly, no provision has
been made for federal and state income taxes in the accompanying
consolidated financial statements.
F-7
<PAGE> 50
EARNINGS PER SHARE. Basic earnings per share is computed based upon the
weighted average number of common Shares outstanding during the period.
Diluted earnings per share is computed to reflect the potential
dilution of all instruments or securities which are convertible into
Shares of common stock.
NEW ACCOUNTING PRONOUNCEMENTS. Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities," establishes standards for reporting and display of
derivative instruments, hedges and their components. The Company will
be required to adopt SFAS 133, amended by SFAS 137, on January 1, 2001.
As of December 31, 1999, the Company had no derivative instruments or
hedging activities and, therefore, does not expect this statement to
have a material effect on its financial position and results of
operations.
RECLASSIFICATIONS. Certain prior years amounts have been reclassified
to conform with the 1999 presentation.
3. ACQUISITIONS AND DISPOSITIONS
On April 1, 1997, the Company acquired Roberts Properties Management,
L.L.C. ("Roberts Management"), the property management company that
managed the Company's multifamily apartment communities since the
Company's inception, from Mr. Roberts. The Operating Partnership issued
a total of 590,000 Units valued at $10.00 per Unit or $5,900,000 to
purchase Roberts Management. Because Roberts Management, a related
party, managed only the properties owned by the Company, the
transaction has been accounted for as the settlement of a contract and
has been expensed in the year ended December 31, 1997.
On August 26, 1997, the Company completed the sale of the Autumn Ridge
community for $10,601,000 in cash. The sale resulted in a gain of
$1,012,000, net of minority interest of Unitholders in the Operating
Partnership. The Company acquired Autumn Ridge in December 1995. Autumn
Ridge is a 207-unit apartment home community located in Cobb County in
the Atlanta metropolitan area. Net sale proceeds were $5,045,000 after
deduction for loan repayment of $5,162,000 and closing costs and
prorations of $394,000. The purchaser, Benchmark Autumn Ridge
Associates, L.P., is not affiliated with the Company. See Note 9 -
Related Party Transactions.
On January 9, 1998, the Company completed the sale of the Windsong
community for $9,750,000 in cash resulting in a gain, net of minority
interest, of $918,000 on the sale of real estate assets and an
extraordinary gain, net of minority interest, of $68,000 on the buyer's
assumption of related mortgage indebtedness. Net sales proceeds were
$5,194,000 after deduction for loan repayment of $3,959,000 and closing
costs and prorations totaling $597,000. Partnership profits interests
of $288,000 were paid to Roberts Properties. The Company reinvested the
net sales proceeds in replacement properties in connection with a
Section 1031 tax-deferred exchange as described below. The purchaser is
not affiliated with the Company. See Note 9 - Related Party
Transactions.
On June 22, 1998, the Company purchased approximately 23.8 acres of
undeveloped land in the Ballantyne area of Charlotte, North Carolina
for $3,540,000 from a local Charlotte investment group. The Company
began construction of a 319-unit multifamily apartment community on the
property during the fourth quarter of 1999. See Note 9 Related Party
Transactions.
On June 24, 1998, the Company purchased approximately 49.1 acres of
undeveloped land located in north Fulton County, Georgia for $5,294,000
from Roberts Properties, Inc. ("Roberts Properties"), an affiliate
owned by Mr. Roberts. The Company intends to construct a 403-unit
multifamily apartment community on the property. Construction of the
118-unit first phase began in the third quarter of 1998 and was
completed in the fourth quarter of 1999. Construction on the 285-unit
second phase began in the second quarter of 1999. See Note 9 Related
Party Transactions.
On June 25, 1998, the Company purchased approximately 35.3 acres of
undeveloped land located in Gwinnett County, Georgia for $2,525,000
from Roberts Properties Old Norcross, Ltd. The Company intends to
construct a
F-8
<PAGE> 51
249-unit multifamily apartment community on the property, which is
anticipated to begin in the second quarter of 2000. See Note 9 -
Related Party Transactions.
On July 17, 1998, the Company completed the sale of its two retail
centers for $2,400,000 in cash resulting in a gain, net of minority
interest, of $300,000. Net sales proceeds were $2,182,000, after
deducting for closing costs and prorations of $218,000. Partnership
profits interests of $60,000 were paid to Roberts Properties. The
purchaser is unaffiliated with the Company. See Note 9 - Related Party
Transactions.
On August 23, 1999, the Company sold the Bentley Place community for
$8,273,000 in cash resulting in a gain, net of minority interest, of
$1,023,000. Net sales proceeds were $3,726,000 after deduction for loan
repayment, including prepayment fee, of $4,166,000, and closing costs,
accrued interest, and prorations totaling $381,000. Partnership profits
interests of $242,000 were paid to Roberts Properties under the amended
partnership agreement of the Operating Partnership. The Company used
the remaining net sales proceeds of $3,484,000 to fund a special
distribution to shareholders and unitholders on August 30, 1999 as
described in Note 7. The purchaser is not affiliated with the Company.
See Note 9 - Related Party Transactions.
Unaudited pro forma amounts for the years ended December 31, 1999 and
1998, assuming the sales of Bentley Place, Windsong, and the two retail
centers had taken place as of January 1 for the periods presented, are
presented below (dollars in thousands, except per share amounts). The
unaudited pro forma information is not necessarily indicative of the
results of operations of the Company had the acquisition and sales
occurred at the beginning of the periods presented, nor is it
indicative of future results.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Total operating revenues $18,682 $16,122
Loss before extraordinary items (164) (164)
Net loss (164) (719)
Per Share Data - Basic and Diluted
Loss before extraordinary items $ (0.04) $ (0.04)
Net loss (0.04) (0.16)
</TABLE>
4. NOTES PAYABLE
LINE OF CREDIT. The Company obtained a $2,000,000 revolving unsecured
line of credit (the "Line") in June 1999 to provide funds for
short-term working capital purposes. The Line has a one-year term and
bears an interest rate of LIBOR + 150 basis points. At December 31,
1999, $1,235,000 was outstanding under the Line.
F-9
<PAGE> 52
MORTGAGE NOTES. Mortgage notes payable were secured by the following
communities at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL OUTSTANDING
RATE AS OF
PROPERTY SECURING MORTGAGE MATURITY 12/31/99 12/31/99 12/31/98
-------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Addison Place - phase I 11/15/09 6.95% $ 9,500,000 $ 0
Bentley Place 08/15/06 7.10 0 4,000,000
Bradford Creek 06/15/08 7.15 8,273,000 8,359,000
Crestmark 10/01/08 6.57 15,778,000 15,957,000
Highland Park 02/15/03 7.30 7,844,000 7,940,000
Ivey Brook 02/15/07 7.14 6,228,000 6,300,000
Plantation Trace 10/15/08 7.09 11,760,000 11,881,000
Preston Oaks 10/15/02 7.21 8,313,000 8,420,000
River Oaks 11/15/03 7.15 8,946,000 9,052,000
Rosewood Plantation 07/15/08 6.62 7,973,000 8,064,000
----------- -----------
$84,615,000 $79,973,000
=========== ===========
</TABLE>
The Company and certain non-owned affiliates of the Company have a
$35,000,000 Advised Guidance Line with Bank of America, N.A. for the
purpose of providing financing for the acquisition or development of
multifamily communities. Financing under the guidance line is available
on a revolving basis and bears interest at LIBOR plus 1.80% or the
prime rate, at the option of the borrower, payable monthly. The
guidance line is not a commitment to lend, and each loan under the
guidance line will be made at Bank of America's discretion in
accordance with normal loan approval procedures. At December 31, 1999,
there was no balance outstanding under the guidance line.
On April 13, 1999, the Company closed a $9,500,000 construction loan to
complete phase one of Addison Place (formerly referred to as Abbotts
Bridge). The loan had a nine-month term and bore an interest rate of
LIBOR plus 160 basis points. In October 1999, the Company closed a
$9,500,000 permanent loan secured by the first phase of Addison Place.
The Company used $8,057,000 of the proceeds of the permanent loan to
repay the construction loan ($8,019,000) and accrued interest ($38,000)
and will use the balance of the proceeds to pay the remaining
construction costs. The permanent loan has a 10-year term with a fixed
interest rate of 6.95% payable in monthly installments of $62,885 based
on a 30-year amortization schedule. The first 12 payments, however, are
interest-only payments of $55,021 per month. Because the property was
less than 95% occupied at closing, the lender required the Company to
obtain an $843,000 letter of credit secured by an equal amount of cash.
In October 1999, the Company closed a $3,000,000 land loan to fund the
initial construction of the second phase of Addison Place. The loan is
secured by the second phase land, has a six-month term, and bears an
interest rate of LIBOR plus 150 basis points.
The scheduled principal payments of all debt outstanding at December
31, 1999 for each of the years ending December 31 are as follows:
<TABLE>
<S> <C>
2000 $ 927,000
2001 1,084,000
2002 9,105,000
2003 16,922,000
2004 893,000
Thereafter 55,684,000
-----------
Mortgage notes payable $84,615,000
===========
</TABLE>
F-10
<PAGE> 53
Real estate assets having a combined depreciated cost of approximately
$105,978,000 serve as collateral for the outstanding mortgage debt at
December 31, 1999.
5. EXTRAORDINARY ITEMS
The 1999 extraordinary item relates to the write-off of unamortized
loan costs and prepayment fee to the lender for the extinguishment of
the mortgage loan secured by the Bentley Place community, which Roberts
Realty sold on August 23, 1999. This extraordinary item is net of
$107,000, which was allocated to the minority interest of the
unitholders in the Operating Partnership, and calculated based on the
weighted average number of partnership Units outstanding during the
period.
The 1998 extraordinary items are comprised of (1) the write-off of
unamortized debt premium associated with the January 9, 1998 buyer's
assumption of the mortgage note secured by the Windsong community upon
sale of the property, (2) the write-off of unamortized loan costs and
prepayment fee to the lender for the refinancing of the mortgage note
secured by the Rosewood Plantation community on June 23, 1998, and (3)
the write-off of unamortized loan costs and prepayment fee to the
lender for the refinancing of the mortgage notes secured by the
Crestmark community on September 30, 1998. These extraordinary items
are net of $306,000, which was allocated to the minority interest of
the unitholders in the Operating Partnership, based on the weighted
average number of Units outstanding during the period.
The 1997 extraordinary item resulted from the write-off of unamortized
deferred financing costs and debt prepayment associated with the August
26, 1997 repayment of the mortgage note secured by the Autumn Ridge
community upon sale of the property. The extraordinary item is net of
$140,000, which was allocated to the minority interest of the
unitholders in the Operating Partnership, based on the weighted average
number of Units outstanding during the period.
6. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Because considerable judgment is necessary to interpret
market data and develop the related estimates of fair value, the
estimates presented herein are not necessarily indicative of the
amounts that could be realized upon disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
Cash and cash equivalents, accounts payable, accrued expenses, security
deposits and other liabilities, due to their short-term nature, are
carried at amounts which reasonably approximate their fair values at
December 31, 1999 and 1998. Fixed rate mortgage debt, the variable rate
line of credit, and the variable rate land loan with carrying values of
$88,850,000 and $79,973,000 at December 31, 1999 and 1998,
respectively, are estimated by management to approximate fair value
based upon interest rates available to the Company for debt with
similar terms and maturities.
7. SHAREHOLDERS' EQUITY
EXCHANGES OF UNITS FOR SHARES. During the years ended December 31,
1999, 1998, and 1997, a total of 185,858, 330,468, and 234,179 Units,
respectively, were exchanged for the same number of Shares. Each
conversion was reflected in the accompanying consolidated financial
statements at book value.
REDEMPTIONS OF UNITS FOR CASH. During the years ended December 31, 1999
and 1998, a total of 3,917 and 14,341 Units were redeemed for cash of
$28,000 and $122,000, respectively. No Units were redeemed for cash in
1997.
F-11
<PAGE> 54
RESTRICTED SHARE AWARDS. During the years ended December 31, 1999 and
1998, the Company granted 9,802 and 13,061 Shares of restricted stock
to certain employees. The market value of these restricted stock grants
totaled $79,000 and $111,000, respectively, which was recorded as
unamortized deferred compensation and is shown as a separate component
of shareholders' equity. These restricted Shares vest 100% at the end
of a three or four-year vesting period and are being amortized to
compensation expense ratably over the vesting period. The Company
issued no restricted Shares in 1997.
TREASURY SHARE REPURCHASES. The Company repurchased 121,200 and 19,300
Shares in 1999 and 1998 at a total cost of $909,000 and $145,000,
respectively. The Company did not repurchase any Shares in 1997.
DIVIDENDS. On November 16, 1999, the Company's board of directors
declared a quarterly distribution in the amount of $0.135 per common
Share and Unit payable on January 14, 2000 to shareholders and
unitholders of record on December 30, 1999. Of the total dividends
declared for 1999 totaling $1.085 per share, approximately $0.12 per
share represents ordinary income, $0.21 per share represents capital
gain and $0.75 per share represents a return of capital to the
shareholders. On December 15, 1998, the board of directors declared a
quarterly distribution in the amount of $0.145 per common Share and
Unit payable on January 15, 1999 to shareholders and unitholders of
record on December 31, 1998. Of the total dividends declared for 1998
totaling $0.5775 per share, approximately $0.16 per share represents
ordinary income, $0.05 per share represents capital gain and $0.37 per
share represents a return of capital to the shareholders. Of the total
dividends declared for 1997 totaling $0.576 per share, approximately
$0.19 per share represented ordinary income, $0.21 per share
represented capital gain, and $0.18 per share represented a return of
capital to the shareholders.
EARNINGS PER SHARE. Reconciliations of income available to common
shareholders and weighted average Shares and Units used in the
Company's basic and diluted earnings per share computations are
detailed below (dollars in thousands).
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income (loss) before extraordinary items - basic $ 900 $ 1,195 $ (2,425)
Minority interest of Unitholders in the Operating
Partnership in income (loss) before extraordinary items 520 748 (1,866)
--------- --------- ---------
Income (loss) before extraordinary items - diluted $ 1,420 $ 1,943 $ (4,291)
========= ========= =========
Net income (loss) - basic $ 716 $ 708 $ (2,609)
Minority interest of Unitholders in Operating
Partnership in net income (loss) 413 442 (2,006)
--------- --------- ----------
Net income (loss) - diluted $ 1,129 $ 1,150 $ (4,615)
========= ========= =========
Weighted average Shares - basic 4,737,008 4,638,265 4,187,013
Dilutive Securities - weighted average Units 2,711,749 2,909,713 3,217,310
--------- --------- ---------
Weighted average Shares - diluted 7,448,757 7,547,978 7,404,323
========= ========= =========
</TABLE>
8. SEGMENT REPORTING
SFAS No. 131 established standards for reporting financial and
descriptive information about operating segments in annual financial
statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision maker in
F-12
<PAGE> 55
deciding how to allocate resources and in assessing performance. The
Company's chief operating decision maker is its chief executive
officer.
The Company owns, operates, and develops multifamily apartment
communities in two major markets located in Georgia and North Carolina.
These apartment communities generate rental revenue and other income
through leasing of apartment homes to a diverse group of residents. The
Company evaluates the performance of each of its apartment communities
on an individual basis. However, because each of the apartment
communities have similar economic characteristics, residents, and
products and services, the apartment communities have been aggregated
into one reportable segment. This segment comprises 100%, 99% and 99%,
respectively, of the Company's total revenues for each of the three
years ended December 31, 1999, 1998, and 1997.
The primary financial measure for the Company's reportable business
segment is net operating income ("NOI"), which represents total
property revenues less total property operating expenses, excluding
general and administrative and depreciation expenses. Current year NOI
is compared to prior year NOI and current year budgeted NOI as a
measure of financial performance. NOI from apartment communities
totaled $12,696,000, $11,162,000, and $11,857,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. All other segment
measurements are disclosed in the Company's consolidated financial
statements.
9. RELATED PARTY TRANSACTIONS
LAND ACQUISITIONS. On June 22, 1998, the Company purchased the
Ballantyne land for $3,540,000 from a local Charlotte investment group
unrelated to the Company. As part of the closing costs, the Operating
Partnership paid Roberts Properties an acquisition fee of $166,000 for
finding the property, negotiating the sales contract, conducting due
diligence and closing the transaction. In addition, the Operating
Partnership will pay Roberts Properties a fee of $1,595,000, or $5,000
per unit, for designing, developing, and overseeing construction of the
Ballantyne project. Through December 31, 1999, the Company had incurred
$1,063,000 of the $1,595,000 development fees. The independent members
of the board of directors approved the foregoing arrangements with
Roberts Properties.
On June 24, 1998, the Company purchased the Addison Place land for
$5,294,000 from Roberts Properties. As part of the closing costs, the
Operating Partnership paid Roberts Properties an acquisition fee of
$250,000 for finding the property, negotiating the sales contract,
conducting due diligence and closing the transaction. In addition, the
Operating Partnership will pay Roberts Properties a fee of $2,015,000,
or $5,000 per unit, for designing, developing, and overseeing
construction of the Addison Place project. Through December 31, 1999,
the Company had incurred $1,540,000 of the $2,015,000 development fees.
The independent members of the board of directors approved the
foregoing arrangements with Roberts Properties after reviewing two
independent appraisals. Roberts Properties acquired the property for
$4,343,000 on March 6, 1997.
On June 25, 1998, the Company purchased the Old Norcross land for
$2,525,000 from Roberts Properties Old Norcross, Ltd.. Mr. Roberts, who
is the general partner of Roberts Properties Old Norcross, Ltd.,
received none of the sale proceeds as general partner or otherwise. As
part of the closing costs, the Operating Partnership paid Roberts
Properties an acquisition fee of $119,250 for finding the property,
negotiating the sales contract, conducting due diligence and closing
the transaction. In addition, the Operating Partnership will pay
Roberts Properties a fee of $1,245,000, or $5,000 per unit, for
designing, developing, and overseeing construction of the Old Norcross
project. The independent members of the board of directors approved the
foregoing arrangements with Roberts Properties after reviewing two
independent appraisals.
CONSTRUCTION CONTRACTS. The Company enters into contractual
commitments in the normal course of business related to the
construction of real estate assets with Roberts Properties
Construction, Inc. ("Roberts Construction"), an affiliate of the
Company owned by Mr. Roberts. Roberts Construction constructed the
first phase of Addison Place under a cost plus 10% contract. Roberts
Construction is currently constructing the second phase of Addison
Place, consisting of 285 apartment homes, under a cost plus 10%
arrangement. Roberts Construction started construction of the
Ballantyne community and intends to hire a third-party general
contractor to complete construction of the community. Roberts
Construction will continue to oversee the project.
F-13
<PAGE> 56
In 2000, the Company expects to enter into a contract with Roberts
Construction related to construction of the Old Norcross project in
Atlanta. During 1999, the Company incurred $116,000 and $64,000 of
costs related to the Ballantyne and Old Norcross projects,
respectively, to Roberts Construction. The contractual amounts for
projects started and/or completed with Roberts Construction during the
last three years, from inception through December 31, 1999, are
summarized in the following table:
<TABLE>
<CAPTION>
ACTUAL/
ESTIMATED ESTIMATED
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
------ -------- ----------
<S> <C> <C> <C>
Ivey Brook $ 7,774,000 $ 7,774,000 $ 0
Crestmark Club - Phase II 4,817,000 4,817,000 0
Bradford Creek 10,394,000 10,394,000 0
Plantation Trace - Phase II 4,908,000 4,908,000 0
Addison Place - Phase I 9,647,000 9,305,000 342,000
Addison Place - Phase II 20,605,000 2,014,000 18,591,000
----------- ----------- -----------
$58,145,000 $39,212,000 $18,933,000
=========== =========== ===========
</TABLE>
The Company paid Roberts Construction for labor and materials to
perform repairs and maintenance for the communities in the amount of
$420,000, $52,000, and $513,000 in 1999, 1998 and 1997, respectively.
DEVELOPMENT FEES. Roberts Properties received fees for various
development services including market studies, business plans, design,
finish selection, interior design and construction administration. Fees
incurred totaled $2,603,000, $0, and $990,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
MANAGEMENT FEES. Roberts Management provided property management
services to the Company through March 31, 1997 for a fee of 5% of gross
income. On April 1, 1997, the Company acquired Roberts Management and,
as a result, no longer pays 5% of gross property revenues to Roberts
Management, although it does bear the actual overhead cost of managing
the properties internally. Property management fees incurred totaled
$0, $0, and $211,000 for the years ended December 31, 1999, 1998 and
1997, respectively. In addition, the Company reimbursed Roberts
Management for the salaries of the on-site property management
personnel through March 31, 1997.
PARTNERSHIP PROFITS INTEREST. Between 1994 and 1996, the Operating
Partnership acquired nine limited partnerships of which Mr. Roberts was
the sole general partner. As a part of each acquisition, the Operating
Partnership assumed an existing financial obligation to an affiliate of
Mr. Roberts. That financial obligation has been formalized as a profits
interest in the Operating Partnership ("Profits Interests").
As the holder of the Profits Interests, Roberts Properties may receive
distributions in certain circumstances. Upon a sale of any of the
acquired properties, Roberts Properties will receive a distribution of
a specified percentage of the gross sales proceeds, or, in the case of
the Crestmark Phase II land, a specified amount. Upon a change in
control of the Company, or the Operating Partnership, Roberts
Properties will receive a distribution of the applicable percentages of
the fair market values of all of the properties and the specified
amount with respect to the Crestmark Phase II land. The amount to be
distributed to Roberts Properties with respect to each affected
property will, however, be limited to the amount by which the gross
proceeds from the sale of that property, or, in connection with a
change in control, its fair market value, exceeds the sum of:
-- the debt assumed, or taken subject to, by the Operating
Partnership in connection with its acquisition of the
property;
-- the equity issued by the Operating Partnership in acquiring
the property; and
-- all subsequent capital improvements to the property made by
the Operating Partnership.
F-14
<PAGE> 57
The percentages which apply to the sales prices, or fair market values,
of the affected properties are shown in the following table:
River Oaks 5%
Rosewood Plantation 5%
Preston Oaks Phase I 5%
Highland Park 5%
Ivey Brook 5%
Crestmark Phase I 5%
Plantation Trace Phase I 6%
In the case of the Crestmark Phase II land, the specified amount is
$86,775.
If the Company exercises its option to acquire all of the outstanding
Units for Shares, it must simultaneously purchase the Profits Interests
for cash in the amount the holder of that interest would receive if a
change in control occurred at that time.
Except for Units and the partnership profits interest related to the
original nine limited partnerships acquired between 1994 and 1996, no
partnership interests have been, or are presently expected to be,
issued or assumed by the Operating Partnership.
During 1999, 1998, and 1997, Profits Interests of $242,000, $348,000,
and $0, respectively, were paid to Roberts Properties.
OTHER FEES. During 1999, 1998 and 1997, affiliates of Mr. Roberts
received fees and cost reimbursements for services related to (1)
leasing administration services at the Shoppes of River Oaks and
Shoppes of Plantation Trace ($21,000), (2) the acquisition and rezoning
of a 1.1 acre parcel of undeveloped land located adjacent to the
existing Preston Oaks community ($25,000), (3) the sale of Autumn Ridge
in August 1997 ($150,000), (4) the sale of the Shoppes of River Oaks
($33,000), and (5) miscellaneous fees and cost reimbursements
($669,000). These fees and costs incurred totaled $242,000, $373,000,
and $283,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
LOAN ORIGINATION FEES. A director of the Company is executive vice
president of a commercial mortgage banking firm that has originated
loans for the Company. Loan origination fees incurred totaled $0,
$63,000, and $48,150 for the years ended December 31, 1999, 1998 and
1997, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company and the Operating Partnership are subject to various legal
proceedings and claims that arise in the ordinary course of business.
While the resolution of these matters cannot be predicted with
certainty, the Company believes that the final outcome of those matters
will not have a material adverse effect on the Company's financial
position or results of operations.
As a result of the mergers of various limited partnerships into the
Operating Partnership, the former partners of these limited
partnerships received Units. Holders of Units have the right to require
the Operating Partnership to redeem their Units for Shares, subject to
certain conditions. Upon submittal of Units for redemption, the
Operating Partnership will have the option either (a) to pay cash for
those Units at their fair market value, which will be based upon the
then current trading price of the Shares, or (b) to acquire those Units
in exchange for Shares (on a one-for-one basis). The Company has
adopted a policy that it will issue Shares in exchange for all future
Units submitted. There were 2,594,836 Units outstanding at December 31,
1999 that could be exchanged for Shares, subject to the conditions
described above.
F-15
<PAGE> 58
The Company enters into contractual commitments in the normal course of
business related to the development of real estate assets. Management
does not believe that the completion of these commitments will result
in a material adverse effect on the Company's financial position or
results of operations.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended
December 31, 1999, 1998, and 1997 were as follows:
A. On April 1, 1997, the Operating Partnership issued 590,000
Units in exchange for the assets and liabilities of Roberts
Management valued at $5,900,000.
B. On January 9, 1998, the Company sold the Windsong community.
As a condition of the sale, the purchaser assumed the mortgage
note payable associated with the property in the amount of
$3,959,000.
12. SUBSEQUENT EVENTS
On February 1, 2000, the Company closed a $2,000,000 land loan secured
by the Old Norcross land to fund initial construction of the second
phase of Addison Place. The loan is secured by the Old Norcross land,
has a one-year term, and bears an interest rate of LIBOR plus 150 basis
points.
F-16
<PAGE> 59
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
ROBERTS REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Initial Cost to Trust Carried at Close of Period
Improvements
Capitalized
Buildings and After Buildings and
Description Encumbrance Land Improvements Acquisition Land Improvements Total
- ----------- ----------- ---- ------------ ----------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
River Oaks $ 8,946 $ 1,837 $ 9,718 $ 758 $ 1,837 $ 10,476 $ 12,313
Rosewood Plantation 7,973 1,310 7,120 171 1,310 7,291 8,601
Preston Oaks 8,313 2,570 11,278 170 2,570 11,448 14,018
Highland Park 7,844 1,827 10,003 80 1,827 10,082 11,909
Ivey Brook 6,228 3,073 8,929 45 3,073 8,974 12,047
Plantation Trace 11,760 2,385 15,802 593 2,385 16,395 18,780
Bentley Place 0 0 0 0 0 0 0
Bradford Creek 8,273 1,672 12,174 30 1,672 12,204 13,876
Crestmark 15,778 4,366 20,397 71 4,366 20,468 24,834
Addison Place Townhomes 9,500 2,080 10,440 0 2,080 10,440 12,520
-------- -------- -------- -------- -------- -------- --------
Total $ 84,615 $ 21,120 $105,861 $ 1,918 21,120 $107,778 $128,898
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Life on which Date of
Accumulated Depreciation Date Original
Description Depreciation is Computed Acquired Construction
- ----------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
River Oaks $ 3,340 3 - 27.5 Years Oct - 94 1992
Rosewood Plantation 2,269 3 - 27.5 Years Oct - 94 1994
Preston Oaks 2,649 3 - 27.5 Years Oct - 94 1995
Highland Park 2,448 3 - 27.5 Years Oct - 94 1995
Ivey Brook 1,763 3 - 27.5 Years Mar - 95 1997
Plantation Trace 3,037 3 - 27.5 Years May - 95 1990
Bentley Place 0 3 - 27.5 Years Mar - 96 1993
Bradford Creek 1,265 3 - 27.5 Years Mar - 96 1998
Crestmark 3,948 3 - 27.5 Years Jun - 96 1996
Addison Place Townhomes 310 3 - 27.5 Years Sep - 99 1999
--------
Total $ 21,029
========
</TABLE>
The accompanying notes are an integral part of this schedule.
(A) The Company enters into contractual commitments in the normal course of
business related to the construction of real estate assets with Roberts
Construction - see Note 9 to the Consolidated Financial Statements.
S-1
<PAGE> 60
(B) Gross capitalized costs of real estate assets are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period $ 122,830 $ 111,778 $ 110,800
Additions during period:
Acquisitions 0 0 0
Other additions 12,915 21,323 10,276
Improvements 950 792 613
--------- --------- ---------
Total Additions 13,865 22,115 10,889
--------- --------- ---------
Deductions during period:
Sales (7,459) (10,781) (9,619)
Other disposals (338) (282) (292)
--------- --------- ---------
Total disposals (7,797) (11,063) (9,911)
--------- --------- ---------
Balance at close of period $ 128,898 $ 122,830 $ 111,778
========= ========= =========
</TABLE>
(C) Accumulated depreciation on real estate assets is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period $ 16,914 $ 13,401 $ 8,915
Additions during period:
Depreciation expense 5,529 5,017 5,708
--------- --------- ---------
Deductions during period
Sales (1,154) (1,304) (1,096)
Other disposals: (260) (200) (126)
--------- --------- ---------
Total disposals (1,414) (1,504) (1,222)
--------- --------- ---------
Balance at close of period $ 21,029 $ 16,914 $ 13,401
========= ========= =========
</TABLE>
S-2
<PAGE> 61
3. Exhibits.
We have filed some of the exhibits required by Item 601 of Regulation
S-K with previous registration statements or reports. As specifically noted in
the following Index to Exhibits, those previously filed exhibits are
incorporated into this annual report on Form 10-K by reference. All exhibits
contained in the following Index to Exhibits that are designated with an
asterisk are incorporated into this annual report by reference from our initial
Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the
applicable exhibit number in that Registration Statement is provided beside the
asterisk.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on
July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994. [* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P.,
dated as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts
Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts
Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our
Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia
Secretary of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging
Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts
Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts
Properties Residential, L.P. (1994 Consolidation). [*3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts
Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger).
[* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging
Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P.
(Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging
Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong
Merger). [* 3.2.4]
</TABLE>
42
<PAGE> 62
<TABLE>
<S> <C>
4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts
Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place
Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for
the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The
Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger).
[Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter
ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging
Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P.
[Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.2 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00
(Preston Oaks). [*6.11.1]
10.1.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents
(Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00
(Highland Park). [* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life
Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of
$1,500,000.00 (Highland Park). [* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated
January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated October 17, 1996, in the original principal amount of
$7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on
Form 10-KSB for the year ended December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life &
Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00
(River Oaks). [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for
the year ended December 31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated
October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to
Exhibit 10.3.5 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
</TABLE>
43
<PAGE> 63
<TABLE>
<S> <C>
10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
Company of America, dated June 23, 1998, in the original principal amount of $8,100,000.00
(Rosewood). [Incorporated by reference to Exhibit 10.4.5 from our quarterly report on Form 10-Q for
the quarter ended June 30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
of The Prudential Insurance Company of America, dated June 23, 1998, and related collateral
documents (Rosewood). [Incorporated by reference to Exhibit 10.4.6 from our quarterly report on
Form 10-Q for the quarter ended June 30, 1998.]
10.4.3 Limited Guaranty between Roberts Realty Investors, Inc. and The Prudential Insurance Company of America,
dated June 23, 1998 (Rosewood). [Incorporated by reference to Exhibit 10.4.7 from our quarterly report on
Form 10-Q for the quarter ended June 30, 1998.]
10.5.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated January 30, 1997, in the original principal amount of $5,670,000.00 (Ivey Brook -
formerly Holcomb Bridge). [Incorporated by reference to Exhibit 10.5.12 from our annual report on Form 10-KSB
for the year ended December 31, 1996.]
10.5.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of West Coast Life Insurance
Company, dated January 30, 1997, in the original principal amount of $750,000.00 (Ivey Brook). [Incorporated
by reference to Exhibit 10.5.13 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.5.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company and West Coast Life Insurance Company, dated January 30, 1997, and related
collateral documents (Ivey Brook). [Incorporated by reference to Exhibit 10.5.14 from our annual report on
Form 10-KSB for the year ended December 31, 1996.]
10.7.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
Company of America, dated September 29, 1998, in the original principal amount of $11,900,000
(Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for
the quarter ended September 30, 1998.]
10.7.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents
(Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for
the quarter ended September 30, 1998.]
10.7.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company
of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.06
from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.8.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek).
[Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended
June 30, 1998.]
10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents
(Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the
quarter ended June 30, 1998.]
10.8.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America,
</TABLE>
44
<PAGE> 64
<TABLE>
<S> <C>
dated June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report
on Form 10-Q for the quarter ended June 30, 1998.]
10.10.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September
30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to
Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.10.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie
Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to
Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.10.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30,
1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q
for the quarter ended September 30, 1998.]
10.11.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly
report on Form 10-QSB for the quarter ended June 30, 1996.]
10.11.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our
quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.12 Letter Agreement between NationsBank, N.A., Charles S. Roberts, Roberts Properties Residential, L.P., Roberts
Properties, Inc., and Roberts Realty Investors, Inc. dated March 6, 1997 regarding the establishment of an
Advised Guidance Line in the amount of up to $35,000.000. [Incorporated by reference to Exhibit 10.17 from our
quarterly report on Form 10-QSB for the quarter ended March 31, 1997.]
10.13 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts
Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our
current report on Form 8-K dated April 1, 1997.]
10.14.01 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12,
1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to
Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.14.02 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass
Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by
reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.14.03 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison
Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated
August 13, 1999.]
10.14.04 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company
of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I).
10.14.05 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents
(Addison Place Phase I).
</TABLE>
45
<PAGE> 65
<TABLE>
<S> <C>
10.14.06 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America,
dated October 25, 1999 (Addison Place Phase I).
10.14.07 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated
October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II).
10.14.08 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First
Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II).
10.15.01 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1,
1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our
quarterly report on Form 10-Q dated August 13, 1999.]
10.15.02 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated
August 13, 1999.]
10.15.03 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated June 1,
1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13,
1999.]
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Current Reports on Form 8-K during the quarter ended December 31, 1999.
We filed no Current Reports on Form 8-K during the quarter ended December 31,
1999.
46
<PAGE> 66
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts
----------------------------------------------
Charles S. Roberts, Chairman of the Board,
Chief Executive Officer and President
Date: March 24, 2000
In accordance with the Exchange Act, this report has been signed
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Charles S. Roberts Chairman of the Board, Chief
- -------------------------------------------- Executive Officer and President March 24, 2000
Charles S. Roberts
/s/ Charles R. Elliott Secretary, Treasurer and Chief March 24, 2000
- -------------------------------------------- Financial Officer (Principal Financial
Charles R. Elliott Officer and Principal Accounting Officer)
/s/ James M. Goodrich Director March 24, 2000
- --------------------------------------------
James M. Goodrich
/s/ Dennis H. James Director March 24, 2000
- --------------------------------------------
Dennis H. James
/s/ Wm. Jarell Jones Director March 24, 2000
- --------------------------------------------
Wm. Jarell Jones
/s/ Ben A. Spalding Director March 24, 2000
- --------------------------------------------
Ben A. Spalding
/s/ George W. Wray, Jr. Director March 24, 2000
- --------------------------------------------
George W. Wray, Jr.
/s/ Weldon R. Humphries Director March 24, 2000
- --------------------------------------------
Weldon R. Humphries
</TABLE>
47
<PAGE> 67
EXHIBIT INDEX
We have filed some of the exhibits required by Item 601 of Regulation
S-K with previous registration statements or reports. As specifically noted in
the following Index to Exhibits, those previously filed exhibits are
incorporated into this annual report on Form 10-K by reference. All exhibits
contained in the following Index to Exhibits that are designated with an
asterisk are incorporated into this annual report by reference from our initial
Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the
applicable exhibit number in that Registration Statement is provided beside the
asterisk.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on
July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994.
[* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated
as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999,
registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary
of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts
Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks,
L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P.
(1994 Consolidation). [* 3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties
Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging Roberts Properties
Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts
Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
</TABLE>
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4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties
Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by
reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club,
L.P. with and into Roberts Properties Residential, L.P.(Crestmark Merger). [Incorporated by reference to
Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging Roberts
Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to
Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.2 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00
(Preston Oaks). [*6.11.1]
10.1.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents
(Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park).
[* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance
Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park).
[* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and
related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks).
[Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended
December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity
Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00 (River Oaks).
[Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December
31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996,
and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual
report on Form 10-KSB for the year ended December 31, 1996.]
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10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
Company of America, dated June 23, 1998, in the original principal amount of $8,100,000.00 (Rosewood).
[Incorporated by reference to Exhibit 10.4.5 from our quarterly report on Form 10-Q for the quarter ended June
30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated June 23, 1998, and related collateral documents (Rosewood).
[Incorporated by reference to Exhibit 10.4.6 from our quarterly report on Form 10-Q for the quarter ended June
30, 1998.]
10.4.3 Limited Guaranty between Roberts Realty Investors, Inc. and The Prudential Insurance Company of America,
dated June 23, 1998 (Rosewood). [Incorporated by reference to Exhibit 10.4.7 from our quarterly report on
Form 10-Q for the quarter ended June 30, 1998.]
10.5.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated January 30, 1997, in the original principal amount of $5,670,000.00 (Ivey Brook - formerly
Holcomb Bridge). [Incorporated by reference to Exhibit 10.5.12 from our annual report on Form 10-KSB for the
year ended December 31, 1996.]
10.5.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of West Coast Life Insurance
Company, dated January 30, 1997, in the original principal amount of $750,000.00 (Ivey Brook). [Incorporated by
reference to Exhibit 10.5.13 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.5.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company and West Coast Life Insurance Company, dated January 30, 1997, and related
collateral documents (Ivey Brook). [Incorporated by reference to Exhibit 10.5.14 from our annual report on
Form 10-KSB for the year ended December 31, 1996.]
10.7.1 Promissory Note executed by Roberts Properties Residential,L.P. in favor of The Prudential Insurance Company
of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace).
[Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended
September 30, 1998.]
10.7.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents
(Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for
the quarter ended September 30, 1998.]
10.7.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance
Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit
10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.8.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek).
[Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended
June 30, 1998.]
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10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents
(Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the
quarter ended June 30, 1998.]
10.8.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated
June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on
Form 10-Q for the quarter ended June 30, 1998.]
10.10.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September
30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit
10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.10.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie
Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to
Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.10.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30,
1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q
for the quarter ended September 30, 1998.]
10.11.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly
report on Form 10-QSB for the quarter ended June 30, 1996.]
10.11.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our
quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.12 Letter Agreement between NationsBank, N.A., Charles S. Roberts, Roberts Properties Residential, L.P., Roberts
Properties, Inc., and Roberts Realty Investors, Inc. dated March 6, 1997 regarding the establishment of an
Advised Guidance Line in the amount of up to $35,000.000. [Incorporated by reference to Exhibit 10.17 from our
quarterly report on Form 10-QSB for the quarter ended March 31, 1997.]
10.13 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts
Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our
current report on Form 8-K dated April 1, 1997.]
10.14.01 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by
reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.14.02 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass
Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by
reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
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10.14.03 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison
Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated
August 13, 1999.]
10.14.04 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company
of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I).
10.14.05 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents
(Addison Place Phase I).
10.14.06 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America,
dated October 25, 1999 (Addison Place Phase I).
10.14.07 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated
October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II).
10.14.08 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First
Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II).
10.15.01 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1,
1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our
quarterly report on Form 10-Q dated August 13, 1999.]
10.15.02 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated
August 13, 1999.]
10.15.03 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated
June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated
August 13, 1999.]
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
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PROMISSORY NOTE
$9,500,000.00 October 25, 1999
Loan No. 6 103 461
FOR VALUE RECEIVED, ROBERTS PROPERTIES RESIDENTIAL, L.P., a Georgia
limited partnership ("BORROWER"), promises to pay to the order of THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("LENDER",
which shall also mean successors and assigns who become holders of this Note),
at Two Ravinia Drive, Suite 1400, Atlanta, Georgia 30346-2110, the principal
sum of NINE MILLION FIVE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS
($9,500,000.00), with interest on the unpaid balance ("BALANCE") at the rate
of six and ninety-five hundredths percent (6.95%) per annum ("NOTE RATE") from
the date of the first disbursement of Loan proceeds under this Note ("FUNDING
DATE") until Maturity (defined below). Capitalized terms used without
definition shall have the meanings ascribed to them in the Instrument (defined
below).
1. Regular Payments. Principal and interest shall be payable as follows:
(a) Interest from the Funding Date through November 15, 1999 shall be
due and payable on December 15, 1999, together with the first
regularly-scheduled payment due under 1(b) below.
(b) Interest only shall be paid in arrears in twelve (12) monthly
installments of Fifty-Five Thousand Twenty and 83/100 Dollars ($55,020.83)
each, commencing on December 15, 1999 and continuing on the fifteenth (15th)
day of each succeeding month to and including November 15, 2000. Each payment
due date is referred to as a "DUE DATE".
(c) Principal and interest shall be paid in one hundred eight (108)
monthly installments of Sixty-Two Thousand Eight Hundred Eighty-Five and
05/100 Dollars ($62,885.05) each commencing on December 15, 2000 and
continuing on the fifteenth (15th) day of each succeeding month to and
including November 15, 2009. Each payment due date is referred to as a "DUE
DATE".
(d) The entire Obligations (as defined in the Instrument (defined
below)) shall be due and payable on November 15, 2009 ("MATURITY DATE").
"MATURITY" shall mean the Maturity Date or earlier date that the Obligations
may be due and payable by acceleration by Lender as provided in the Documents.
(d) Interest on the Balance for any full month shall be calculated on
the basis of a three hundred sixty (360) day year consisting of twelve (12)
months of thirty (30) days each. For any partial month, interest shall be due
in an amount equal to (i) the Note Rate divided by 360 multiplied by (ii) the
number of days any Balance is outstanding through and including the day of
payment.
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<PAGE> 2
2. Late Payment and Default Interest
(a) Late Charge. If any payment due under the Documents is not fully
paid by its Due Date, a late charge of $100.00 per day (the "DAILY CHARGE")
shall be assessed for each day that elapses until payment in full is made
(including the date payment is made); provided, however, that if any such
payments, together with all accrued Daily Charges, are not fully paid by the
fourteenth (14th) day following their Due Date, a late charge equal to four
percent (4%) of such payments (the "LATE CHARGE") shall be assessed and be
immediately due and payable. The Late Charge shall be payable in lieu of Daily
Charges that shall have accrued. The Late Charge may be assessed only once on
each overdue payment. These charges shall be paid to defray the expenses
incurred by Lender in handling and processing such delinquent payment(s) and
to compensate Lender for the loss of the use of such funds. The Daily Charge
and Late Charge shall be secured by the Documents. The imposition of the Daily
Charge, Late Charge, and/or requirement that interest be paid at the Default
Rate (defined below) shall not be construed in any way to (i) excuse Borrower
from its obligation to make each payment under this Note promptly when due or
(ii) preclude Lender from exercising any rights or remedies available under
the Documents upon an Event of Default.
(b) Acceleration. Upon an Event of Default, including a breach of
Section 5.01 of the Instrument, Lender may declare the Balance, unpaid accrued
interest, the Prepayment Premium (defined below) and all other Obligations
immediately due and payable in full.
(c) Default Rate. Upon an Event of Default or at Maturity, whether by
acceleration (due to a voluntary or involuntary default) or otherwise, the
entire Obligations (excluding accrued but unpaid interest if prohibited by
law) shall bear interest at the Default Rate. The "DEFAULT RATE" shall be the
lesser of (i) the maximum rate allowed by the law or (ii) the greater of (A)
the Note Rate plus five percent (5%) or (B) five percent (5%) plus the prime
rate (for corporate loans at large United States money center commercial
banks) published in the Wall Street Journal on the first Business Day (defined
below) of the month in which the Event of Default or Maturity occurs or
continues. The term "BUSINESS DAY" shall mean a day which commercial banks are
not authorized or required by law to close in the Property State or in the
State where payments made by Borrower are received.
3. Application of Payments. Before an Event of Default, all payments
received under this Note shall be applied in the following order: (a) to
unpaid Daily Charges, Late Charges and costs of collection; (b) to any
Prepayment Premium due; (c) to interest on the Balance; and (d) then to the
Balance. After an Event of Default, all payments shall be applied in any order
determined by Lender in its sole discretion.
4. Prepayment. This Note may be prepaid, in whole or in part, upon at
least thirty (30) days' prior written notice to Lender and upon payment of all
accrued interest (and other Obligations due under the Documents) and a
prepayment premium ("PREPAYMENT PREMIUM") equal to the greater of (a) one
percent (1%) of the principal amount being prepaid multiplied by the quotient
of the number of full months remaining until the Maturity Date divided by the
number of full months comprising the term of this Note, or (b) the Present
Value of the Loan (defined below) less the amount of principal and accrued
interest (if any) being prepaid, calculated as of the prepayment date. The
Prepayment Premium shall be due and payable, except as provided in the
Instrument or as limited by law, upon any prepayment of this Note, whether
voluntary or involuntary, and Lender shall not be obligated to accept any
prepayment of the Note unless it is accompanied by the Prepayment Premium, all
accrued interest and all other Obligations due under the Documents. Unless
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<PAGE> 3
prepayment occurs on a Due Date, the actual number of days until the next Due
Date will be used to discount during that partial month. Lender shall notify
Borrower of the amount and calculation of the Prepayment Premium. Borrower
agrees that (a) Lender shall not be obligated to actually reinvest the amount
prepaid in any Treasury obligation and (b) the Prepayment Premium is directly
related to the damages that Lender will suffer as a result of the prepayment.
The "PRESENT VALUE OF THE LOAN" shall be determined by discounting all
scheduled payments remaining to the Maturity Date attributable to the amount
being prepaid at the Discount Rate (defined below). The "DISCOUNT RATE" is the
rate which, when compounded monthly, is equivalent to the Treasury Rate
(defined below), when compounded semi-annually. The "TREASURY RATE" is the
semi-annual yield on the Treasury Constant Maturity Series with maturity equal
to the remaining weighted average life of the Loan (defined below), for the
week prior to the prepayment date, as reported in Federal Reserve Statistical
Release H.15 - Selected Interest Rates, conclusively determined by Lender
(absent a clear mathematical calculation error) on the prepayment date. The
rate will be determined by linear interpolation between the yields reported in
Release H.15, if necessary. If Release H.15 is no longer published, Lender
shall select a comparable publication to determine the Treasury Rate.
Notwithstanding the foregoing, no Prepayment Premium shall be due if the Note
is prepaid during the last thirty (30) days prior to the Maturity Date.
5. No Usury. Under no circumstances shall the aggregate amount paid or to
be paid as interest under this Note exceed the highest lawful rate permitted
under applicable usury law ("MAXIMUM RATE"). If under any circumstances the
aggregate amounts paid on this Note shall include interest payments which
would exceed the Maximum Rate, Borrower stipulates that payment and collection
of interest in excess of the Maximum Rate ("EXCESS AMOUNT") shall be deemed
the result of a mistake by both Borrower and Lender and Lender shall promptly
credit the Excess Amount against the Balance or refund to Borrower any portion
of the Excess Amount which cannot be so credited.
6. Security and Documents Incorporated. This Note is the Note referred to
and secured by the Deed to Secure Debt and Security Agreement of even date
herewith between Borrower and Lender (the "INSTRUMENT") and is secured by the
Property. Borrower shall observe and perform all of the terms and conditions
in the Documents. The Documents are incorporated into this Note as if fully
set forth in this Note.
7. Treatment of Payments. All payments under this Note shall be made,
without offset or deduction, (a) in lawful money of the United States of
America at the office of Lender or at the place (and in the manner) Lender may
specify by written notice to Borrower, (b) in immediately available federal
funds, and (c) if received by Lender prior to 2:00 p.m. local time at such
place, shall be credited on that day or else, at Lender's option, shall be
credited on the next Business Day. Initially (unless waived by Lender), and
until Lender shall direct Borrower otherwise, Borrower shall make all payments
due under this Note in the manner set forth in Section 3.13 of the Instrument.
If any Due Date falls on a day which is not a Business Day, then the payment
shall be deemed to have fallen on the next succeeding Business Day.
8. Limited Recourse Liability. Except to the extent set forth in
Paragraph 8 and Paragraph 9 of this Note, neither the Borrower nor any general
partner(s) of Borrower (singularly or collectively, the "Exculpated Parties")
shall have any personal liability for the Obligations. Notwithstanding the
preceding sentence, Lender may bring a foreclosure action or other appropriate
action to enforce the Documents or realize upon and protect the Property
(including, without limitation, naming the Exculpated Parties in the actions)
and in addition THE EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY FOR:
3
<PAGE> 4
(a) any indemnity, guaranty, master lease or similar instrument
furnished in connection with the Loan (including, without limitation, the
provisions of Sections 8.03, 8.04, 8.05, 8.06 and 8.07 of the Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect
to the Property which are not paid and applicable to Borrower's period of
ownership;
(c) any security deposits of tenants (i) not turned over to Lender
upon foreclosure, sale (pursuant to power of sale), or conveyance in lieu
thereof, or (ii) not turned over to a receiver or trustee for the Property
after appointment;
(d) any insurance proceeds or condemnation awards neither turned over
to Lender nor used in compliance with Section 3.07 and 3.08 of the Instrument;
(e) waste of the Property;
(f) any rents or other income from the Property received by any of
the Exculpated Parties after a default under the Documents and not otherwise
applied to the Obligations evidenced by this Note or to the current (not
deferred) operating expenses of the Property; PROVIDED, HOWEVER, THAT THE
EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for amounts paid as expenses
to a person or entity related to or affiliated with any of the Exculpated
Parties unless the payments are expressly permitted in the Documents;
(g) Borrower's failure to maintain any letter of credit required under
the Documents; and
(h) all actual legal fees, including the allocated costs of Lender's
staff attorneys, and other expenses incurred by Lender in enforcing the
Documents if Borrower contests, delays, or otherwise hinders or opposes
(including, without limitation, the filing of a bankruptcy) any of Lender's
enforcement actions.
9. Full Recourse Liability. Notwithstanding the provisions of Paragraph
8 of this Note, the EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for the
Obligations if:
(a) there shall be any breach or violation of Article V of the
Instrument (the amount of such personal liability under this Paragraph 9(a),
however, shall be limited to the actual losses suffered by Lender because of
such breach); or
(b) there shall be any actual, but not constructive fraud, in
connection with the Loan by any of the Exculpated Parties in connection with
the Property, the Documents, the Loan application, or any other aspect of the
Loan; or
(c) the Property shall become an asset in (i) a voluntary bankruptcy
or insolvency proceeding or (ii) an involuntary bankruptcy or insolvency
proceeding which is not dismissed within ninety (90) days of filing (which
Borrower has participated in causing to be filed or respecting which Borrower
has colluded with a creditor or a principal in Borrower to cause such
involuntary proceeding to be filed); provided, however, that this Paragraph
9(c) shall not apply if an involuntary bankruptcy is filed by Lender.
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<PAGE> 5
10. Joint and Several Liability. This Note shall be the joint and several
obligation of all makers, endorsers, guarantors and sureties, and shall be
binding upon them and their respective successors and assigns and shall inure
to the benefit of Lender and its successors and assigns.
11. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY
ACTS OR OMISSIONS OF LENDER OR BORROWER IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, this Note has been executed by Borrower as of the
date first set forth above.
BORROWER:
ROBERTS PROPERTIES RESIDENTIAL, L.P.,
a Georgia limited partnership
BY: Roberts Realty Investors, Inc., a Georgia
corporation, its sole general partner
By: /s/ Charles S. Roberts
---------------------------------------
Charles S. Roberts, President
[CORPORATE SEAL]
5
<PAGE> 1
EXHIBIT 10.14.05
================================================================================
PREPARED BY AND UPON
RECORDATION RETURN TO:
McCullough Sherrill, LLP
1409 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Paul P. Mattingly
ROBERTS PROPERTIES RESIDENTIAL, L.P.
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Lender)
---------------------------------
DEED TO SECURE DEBT AND
SECURITY AGREEMENT
---------------------------------
Dated: As of October 25, 1999
Location: 5100 Abbotts Bridge Road, Alpharetta, Georgia
County: Fulton
Loan Number: 6 103 461
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I - OBLIGATIONS........................................................................................ 2
Section 1.01 Obligations................................................................ 2
Section 1.02 Documents.................................................................. 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES.................................................................... 3
Section 2.01 Title, Legal Status and Authority.......................................... 3
Section 2.02 Validity of Documents...................................................... 3
Section 2.03 Litigation................................................................. 3
Section 2.04 Status of Property......................................................... 4
Section 2.05 Tax Status of Borrower..................................................... 4
Section 2.06 Bankruptcy and Equivalent Value............................................ 4
Section 2.07 Disclosure................................................................. 5
Section 2.08 Illegal Activity........................................................... 5
ARTICLE III - COVENANTS AND AGREEMENTS......................................................................... 5
Section 3.01 Payment of Obligations..................................................... 5
Section 3.02 Continuation of Existence.................................................. 5
Section 3.03 Taxes and Other Charges.................................................... 5
Section 3.04 Defense of Title, Litigation, and Rights under Documents................... 6
Section 3.05 Operation and Maintenance of Property...................................... 6
Section 3.06 Insurance.................................................................. 7
Section 3.07 Damage and Destruction of Property......................................... 9
Section 3.08 Condemnation............................................................... 10
Section 3.09 Liens and Liabilities...................................................... 11
Section 3.10 Tax and Insurance Deposits................................................. 11
Section 3.11 ERISA...................................................................... 12
Section 3.12 Environmental Representations, Warranties, and Covenants................... 12
Section 3.13 ........................................................................... 14
Section 3.14 Inspection................................................................. 14
Section 3.15 Records, Reports, and Audits............................................... 14
Section 3.16 Borrower's Certificates.................................................... 15
Section 3.17 Full Performance Required; Survival of Warranties.......................... 15
Section 3.18 Additional Security........................................................ 15
Section 3.19 Further Acts............................................................... 15
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION........................................................ 16
Section 4.01 Expenses and Advances...................................................... 16
Section 4.02 Subrogation................................................................ 16
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY..................................................... 16
Section 5.01 Due-on-Sale or Encumbrance................................................. 16
Section 5.02 One-time Transfer.......................................................... 17
Section 5.03 Permitted Transfers Without Fee............................................ 18
</TABLE>
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<TABLE>
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ARTICLE VI - DEFAULTS AND REMEDIES............................................................................. 19
Section 6.01 Events of Default.......................................................... 19
Section 6.02 Remedies................................................................... 20
Section 6.03 Expenses................................................................... 21
Section 6.04 Rights Pertaining to Sales................................................. 22
Section 6.05 Application of Proceeds.................................................... 22
Section 6.06 Additional Provisions as to Remedies....................................... 22
Section 6.07 Waiver of Rights and Defenses.............................................. 22
ARTICLE VII - SECURITY AGREEMENT............................................................................... 23
Section 7.01 Security Agreement......................................................... 23
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES................................................ 23
Section 8.01 Limited Recourse Liability................................................. 23
Section 8.02 General Indemnity.......................................................... 23
Section 8.03 Transaction Taxes Indemnity................................................ 23
Section 8.04 ERISA Indemnity............................................................ 23
Section 8.05 Environmental Indemnity.................................................... 23
Section 8.06 Duty to Defend, Costs and Expenses......................................... 24
Section 8.07 Recourse Obligation and Survival........................................... 24
ARTICLE IX - ADDITIONAL PROVISIONS............................................................................. 24
Section 9.01 Usury Savings Clause....................................................... 24
Section 9.02 Notices.................................................................... 24
Section 9.03 Sole Discretion of Lender.................................................. 25
Section 9.04 Applicable Law and Submission to Jurisdiction.............................. 25
Section 9.05 Construction of Provisions................................................. 25
Section 9.06 Transfer of Loan........................................................... 26
Section 9.07 Miscellaneous.............................................................. 26
Section 9.08 Entire Agreement........................................................... 27
Section 9.09 WAIVER OF TRIAL BY JURY.................................................... 27
ARTICLE X - LOCAL LAW PROVISIONS............................................................................... 27
Section 10.01 WAIVER..................................................................... 27
Section 10.02 Nature of Instrument....................................................... 27
Section 10.03 No Novation................................................................ 27
Section 10.04 Georgia Remedies........................................................... 28
</TABLE>
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<PAGE> 4
DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage and Security Agreement:
<TABLE>
<S> <C>
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Default Rate Section 1.01 (a)
Demand Section 9.12 (n)
Depository Section 3.07 (c)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (I)
Laws Section 3.05 (c)
Lease Section 9.05 (k)
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
</TABLE>
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<TABLE>
<S> <C>
Loan Recitals, Section 1
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (i)
Personal Property Section 6.02 (j)
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.1
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (d)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
</TABLE>
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<PAGE> 6
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (this "INSTRUMENT") is made as
of the ___ day of October, 1999, by ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership, having its principal office and place of business
c/o Roberts Properties, Inc., 8010 Roswell Road, Suite 120, Atlanta, Georgia
30350, as mortgagor ("BORROWER"), to THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation, having an office at Two Ravinia Drive,
Suite 1400, Atlanta, Georgia 30346, as mortgagee ("LENDER").
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT, PURSUANT TO WHICH LENDER
MAY TAKE THE PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A JUDICIAL
FORECLOSURE ACTION UPON DEFAULT BY BORROWER UNDER THIS INSTRUMENT.
RECITALS:
1. Borrower, by the terms of its Promissory Note executed on the same
date as this Instrument ("NOTE") and in connection with the loan ("LOAN") from
Lender to Borrower, is indebted to Lender in the principal sum of NINE MILLION
FIVE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($9,500,000.00).
2. Borrower desires to secure the payment of and the performance of all
of its obligations under the Note and certain additional Obligations (as
defined in Section 1.01). THE MATURITY DATE (AS THAT TERM IS DEFINED IN THE
NOTE) OF THE NOTE IS NOVEMBER 15, 2009.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Grants, bargains, sells, assigns, transfers, pledges, warrants, and
conveys to Lender in FEE SIMPLE, subject only to the matters listed in Exhibit
C, WITH POWER OF SALE, and grants Lender security title to, and a security
interest in, the following property, rights, interests and estates owned by
Borrower (collectively, the "PROPERTY"):
(i) The real property in Fulton County, Georgia and described in
Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including
fixtures) now or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water
rights, air rights, development power or rights, options, reversion and
remainder rights, and any other rights owned by Borrower and relating to or
usable in connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to
all land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof, and all sidewalks, alleys, and
strips and gores of land adjacent to or used in connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under
all plans, specifications, surveys, studies, reports, permits, licenses,
agreements, contracts, instruments, books of account, insurance policies, and
any other documents relating to the use, construction, occupancy, leasing,
activity, or operation of the Property;
<PAGE> 7
(vi) All of the fixtures and personal property described in
Exhibit B owned by Borrower and replacements thereof; but excluding all
personal property owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or
by any proceeding or purchase in lieu thereof ) of the Property, including
awards resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases,
licenses, or other agreements affecting the use, enjoyment or occupancy of the
Property now or later existing (including any use or occupancy arrangements
created pursuant to Title 7 or 11 of the United States Code, as amended from
time to time, or any similar federal or state laws now or later enacted for
the relief of debtors (the "BANKRUPTCY CODE") and all extensions and
amendments thereto (collectively, the "LEASES") and all Borrower's right,
title and interest under the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or
use of the Property (including any payments received with respect to any
Tenant or the Property pursuant to the Bankruptcy Code) and all cash, security
deposits, advance rentals, or similar payments relating thereto (collectively,
the "RENTS") and all proceeds from the cancellation, termination, surrender,
sale or other disposition of the Leases, and the right to receive and apply
the Rents to the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to
Lender all of Borrower's right, title, interest and estates in and to the
Leases and the Rents, subject to the terms and license granted to the Borrower
under that certain Assignment of Leases and Rents made by Borrower to Lender
dated the same date as this Instrument (the "ASSIGNMENT"), which document
shall govern and control the provisions of this assignment.
TO HAVE AND TO HOLD the Property unto the Lender and its successors and
assigns forever, subject to the matters listed in Exhibit C ("PERMITTED
ENCUMBRANCES") and the provisions of this Instrument.
SHOULD THE OBLIGATIONS BE PAID according to the tenor and effect thereof when
the same shall become due and payable, then this Instrument shall be canceled
and surrendered (except for the obligations of Borrower set forth in Section
3.11 and 3.12 and Article VIII hereof, which shall survive such cancellation
and surrender).
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 OBLIGATIONS. This Instrument is intended (i) to operate and
to be construed as a deed passing title to the Property to Lender, and is made
under those provisions of the existing laws of the State of Georgia relating
to deeds to secure debt, and not as a mortgage; and (ii) to constitute a
security agreement pursuant to the Uniform Commercial Code as enacted in the
State of Georgia, and (iii) executed, acknowledged, and delivered by Borrower
to secure and enforce the following obligations (collectively, the
"OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities
under the Documents including (i) the Prepayment Premium (as defined in the
Note) ("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the
Note and at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if
applicable and to the extent permitted by Laws (defined below), and (iii)
renewals, extensions, and amendments of the Documents;
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<PAGE> 8
(b) Performance of every obligation, covenant, and agreement
under the Documents including renewals, extensions, and amendments of the
Documents; and
(c) Payment of all sums advanced (including costs and expenses)
by Lender pursuant to the Documents including renewals, extensions, and
amendments of the Documents.
SECTION 1.02 DOCUMENTS. The "DOCUMENTS" shall mean this Instrument, the
Note, the Assignment, and any other written agreement executed in connection
with the closing of the Loan (but excluding the Loan application and Loan
commitment) and by the party against whom enforcement is sought, including
those given to evidence or further secure the payment and performance of any
of the Obligations, and any written renewals, extensions, and amendments of
the foregoing, executed by the party against whom enforcement is sought. All
of the provisions of the Documents are incorporated into this Instrument as if
fully set forth in this Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY. Borrower (i) is seised of
the Land and Improvements in fee simple and has good and marketable title to
the Property, free and clear of all liens, deeds to secure debt, charges,
encumbrances, and security interests, except the Permitted Encumbrances; (ii)
will forever warrant and defend its title to the Property and the validity,
enforceability, and priority of the security title and security interest
created by this Instrument against the claims of all persons; (iii) is a
limited partnership duly organized, validly existing, and in good standing and
qualified to transact business under the laws of its state of organization or
incorporation ("ORGANIZATION STATE") and the state where the Property is
located ("PROPERTY STATE"); and (iv) has all necessary approvals, governmental
and otherwise, and full power and authority to own its properties (including
the Property) and carry on its business.
SECTION 2.02 VALIDITY OF DOCUMENTS. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii)
have received all necessary approvals and consents; (iv) will not violate,
conflict with, breach, or constitute (with notice or lapse of time, or both) a
default under (1) any law, order or judgment of any court, governmental
authority, or the governing instrument of Borrower or (2) any indenture,
agreement, or other instrument to which Borrower is a party or by which it or
any of its property is bound or affected; (v) will not result in the creation
or imposition of any lien, charge, security title, or encumbrance upon any of
its properties or assets except for those in this Instrument; and (vi) will
not require any authorization or license from, or any filing with, any
governmental or other body (except for the recordation of this Instrument and
Uniform Commercial Code ("U.C.C.") filings). The Documents constitute legal,
valid, and binding obligations of Borrower.
SECTION 2.03 LITIGATION. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar
proceeding), pending or, to the best knowledge of Borrower, threatened or
contemplated against, or affecting, Borrower or the Property which would have
a material adverse affect on either the Property or Borrower's ability to
perform its obligations.
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<PAGE> 9
SECTION 2.04 STATUS OF PROPERTY.
(a) The Land and Improvements are not located in an area
identified by the Secretary of Housing and Urban Development, or any
successor, as an area having special flood hazards pursuant to the National
Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973, or the
National Flood Insurance Reform Act of 1994, as each have been or may be
amended, or any successor law (collectively, the "FLOOD ACTS") or, if located
within any such area, Borrower has and will maintain the insurance prescribed
in Section 3.06 below.
(b) Borrower has all necessary (i) certificates, licenses, and
other approvals, governmental and otherwise, for the operation of the Property
and the conduct of its business and (ii) zoning, building code, land use,
environmental and other similar permits or approvals, all of which are
currently in full force and effect and not subject to revocation, suspension,
forfeiture, or modification. The Property and its use and occupancy is in full
compliance with all Laws and Borrower has received no notice of any violation
or potential violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and
sewer) required for its use.
(d) All public roads and streets necessary to serve the Property
for its use have been completed, are serviceable, are legally open, and have
been dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other
casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings,
fixtures, and equipment (other than Tenants' property) used in connection with
the operation of the Property, free of all security interests, liens, security
titles, or encumbrances except the Permitted Encumbrances and those created by
this Instrument.
(h) The Property (1/) is assessed for real estate tax purposes as
one or more wholly independent tax lot(s), separate from any adjoining land or
improvements, and (2/) no other land or improvements are assessed and taxed
together with the Property. (3/)
SECTION 2.05 TAX STATUS OF BORROWER. Borrower is not a "foreign person"
within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE. No bankruptcy,
reorganization, insolvency, liquidation, or other proceeding for the relief of
debtors has been instituted by or against Borrower, any general partner of
Borrower (if Borrower is a partnership), or any manager or managing member of
Borrower (if Borrower is a limited liability company). Borrower has received
reasonably equivalent value for granting this Instrument.
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(1) not, as of the date of this Instrument,
(2) certain
(3) Borrower agrees to cause the Property to be assessed for real
estate tax purposes as one wholly independent tax lot,
separate from any adjoining land or improvements, within one
hundred eighty (180) days of the date of this Instrument.
Failure to satisfy this obligation shall constitute a
default under the Documents.
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<PAGE> 10
SECTION 2.07 DISCLOSURE. Borrower has disclosed to Lender all material
facts and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading. There has
been no adverse change in any condition, fact, circumstance, or event that
would make any such information materially inaccurate, incomplete or otherwise
misleading.
SECTION 2.08 ILLEGAL ACTIVITY. No portion of the Property has been or will
be purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no
illegal activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 PAYMENT OF OBLIGATIONS. Borrower shall timely pay and cause
to be performed the Obligations.
SECTION 3.02 CONTINUATION OF EXISTENCE. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of
law, all or substantially all of its assets; (b) reorganize or change its
legal structure without Lender's prior written consent (4/); (c) change its
name, address, or the name under which Borrower conducts its business without
promptly notifying Lender; or (d) do anything to cause the representations in
Section 2.02 to become untrue.
SECTION 3.03 TAXES AND OTHER CHARGES.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS")
ten (10) days prior to the date any fine, penalty, interest or charge for
nonpayment may be imposed. Unless Borrower is making deposits per Section
3.10, Borrower shall provide Lender with receipts evidencing such payments
(except for income taxes, franchise taxes, ground rents, maintenance charges,
and utility charges) within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined
below) is continuing, Borrower may, prior to delinquency and at its sole
expense, contest any Assessment, but this shall not change or extend
Borrower's obligation to pay the Assessment as required above unless (i)
Borrower gives Lender prior written notice of its intent to contest an
Assessment; (ii) Borrower demonstrates to Lender's reasonable satisfaction
that (1) the Property will not be sold to satisfy the Assessment prior to the
final determination of the legal proceedings, (2) it has taken such actions as
are required or permitted to accomplish a stay of any such sale, or (3) it has
furnished a bond or surety (satisfactory to Lender in form and amount)
sufficient to prevent a sale of the Property; (iii) at Lender's option,
Borrower has deposited the full amount necessary to pay any unpaid portion of
the Assessments with Lender; and (iv) such proceeding shall be permitted under
any other instrument to which Borrower or the Property is subject (whether
superior or inferior to this Instrument); provided, however, that the
foregoing shall not apply to the contesting of any income taxes, franchise
taxes, ground rents, maintenance charges, and utility charges.
(c) Documentary Stamps and Other Charges. Borrower shall pay all
taxes, assessments, charges, expenses, costs and fees (including registration
and recording fees and revenue, transfer, stamp, intangible, indebtedness and
any similar taxes)(collectively, the "TRANSACTION TAXES") required in
connection with the making and/or recording of the Documents. If Borrower
fails to pay the Transaction Taxes after demand,
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(4) (which consent shall not be unreasonably withheld)
5
<PAGE> 11
Lender may (but is not obligated to) pay these and Borrower shall reimburse
Lender on demand for any amount so paid with interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts
from the value of real property for the purpose of taxation any lien or
encumbrance thereon, (ii) taxes deeds to secure debt or other security
instruments for federal, state or local purposes or changes the manner of the
collection of any such existing taxes, and/or (iii) imposes a tax, either
directly or indirectly, on any of the Documents or the Obligations, Borrower
shall, if permitted by law, pay such tax within the statutory period or within
twenty (20) days after demand by Lender, whichever is less; provided, however,
that if, in the opinion of Lender, Borrower is not permitted by law to pay
such taxes, Lender shall have the option to declare the Obligations
immediately due and payable (without any Prepayment Premium) upon sixty (60)
days' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not
claim or be entitled to any credit(s) on account of the Obligations for any
part of the Assessments and no deduction shall be made or claimed from the
taxable value of the Property for real estate tax purposes by reason of the
Documents or the Obligations. If such claim, credit or deduction is required
by law, Lender shall have the option to declare the Obligations immediately
due and payable (without any Prepayment Premium) upon sixty (60) days' notice
to Borrower.
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER DOCUMENTS.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien, security title, or security interest created thereby, and any rights of
Lender under the Documents against the claims of all persons, and shall
promptly notify Lender of any such claims. Lender (whether or not named as a
party to such proceedings) is authorized and empowered (but shall not be
obligated) to take such additional steps as it may deem necessary or proper
for the defense of any such proceeding or the protection of the lien, security
title, security interest, validity, enforceability, or priority of this
Instrument, title to the Property, or any rights of Lender under the
Documents, including the employment of counsel, the prosecution and/or defense
of litigation, the compromise, release, or discharge of such adverse claims,
the purchase of any tax title, the removal of such any liens, security title
and security interests, and any other actions Lender deems necessary to
protect its interests. Borrower authorizes Lender to take any actions required
to be taken by Borrower, or permitted to be taken by Lender, in the Documents
in the name and on behalf of Borrower. Borrower shall reimburse Lender on
demand for all expenses (including attorneys' fees) incurred by it in
connection with the foregoing and Lender's exercise of its rights under the
Documents. All such expenses of Lender, until reimbursed by Borrower, shall be
part of the Obligations, bear interest at the applicable interest rate
specified in the Note, which shall be the Default Rate unless prohibited by
Laws, and shall be secured by this Instrument.
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will
promptly make all necessary repairs, replacements, additions, and improvements
necessary to ensure that the Property shall not in any way be diminished or
impaired. Borrower will not cause or allow any of the Property to be misused,
wasted, or to deteriorate and Borrower will not abandon the Property. No new
building, structure, or other improvement shall be constructed on the Land nor
shall any material part of the Improvements be removed, demolished, or
structurally or materially altered, without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property
fully equipped and will replace all worn out or obsolete Property with new,
comparable fixtures or Property. Borrower will not, without Lender's prior
written consent, remove any Property covered by this Instrument unless the
same is replaced by Borrower with a new, comparable article (i) owned by
Borrower free and clear of any lien, security title or
6
<PAGE> 12
security interest (other than the Permitted Encumbrances and those created by
this Instrument) or (ii) leased by Borrower (A) with Lender's prior written
consent or (B) if the replaced Property was leased at the time of execution of
this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "LAWS"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property
is not in compliance with any of the foregoing, Borrower will promptly send
Lender notice and a copy of the proceeding or violation notice. If the
Property is not in compliance with all Laws, Lender may impose additional
requirements upon Borrower including monetary reserves or financial
equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property; (iv) execute or file any
subdivision plat affecting the Property; (v) consent to the annexation of the
Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the
Property to become a non-conforming use under zoning ordinances or any present
or future non-conforming use of the Property to be discontinued; or (viii)
fail to comply with the terms of the Permitted Encumbrances.
SECTION 3.06 INSURANCE.
(a) Casualty Insurance. Borrower shall keep the Property insured
for the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but
in no event less than the lesser of (A) the Obligations or (B) the Full
Insurable Value (defined below) of the Property, subject to verification by
Lender and with a deductible not to exceed Ten Thousand Dollars ($10,000.00).
"FULL INSURABLE VALUE" shall mean the one hundred percent (100%) replacement
cost of the Property, without allowance for depreciation and exclusive of the
cost of excavations, foundations, and footings, as determined, at Borrower's
expense, periodically (but at least once per year) by the insurance company or
an appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance
in an amount equal to one (1) year's total income from the Property including
all rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards and in which flood insurance has been made
available under the Flood Acts in an amount equal to the lesser of (1) the
original amount of the Note or (2) the maximum limit of coverage available for
the Property under the Flood Acts; (iv) against damage or loss from (1)
sprinkler system leakage and (2) boilers, boiler tanks, heating and
air-conditioning equipment, pressure vessels, auxiliary piping, and similar
apparatus, in the amount required by Lender; (v) during the period of any
construction, repair, restoration, or replacement of the Property, a standard
builder's risk policy with extended coverage in an amount at least equal to
the Full Insurable Value of such Property, and worker's compensation,
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<PAGE> 13
in statutory amounts; and (vi) against damage or loss by earthquake(5/) and
other natural phenomenon in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily
injury or death or property damage occurring in, upon, or about the Property
or any street, drive, sidewalk, curb, or passageway adjacent thereto, in the
amount required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary coverage plus umbrella coverage), which insurance shall
include operations and blanket contractual liability coverage which insures
contractual liability under the indemnifications set forth in Section 8.02
below (but such coverage or the amount thereof shall in no way limit such
indemnifications). Upon request, Borrower shall maintain insurance or carry
additional amounts of insurance covering Borrower or the Property as Lender
shall reasonably require(6/).
(c) Form of Policy. All insurance required under this Section
shall be fully paid for, non-assessable, and the policies shall contain such
provisions, endorsements, and expiration dates as Lender shall reasonably
require. The policies shall be issued by insurance companies authorized to do
business in the Property State, approved by Lender, and having (i) an
investment grade rating or claims paying ability assigned by one or more
credit rating agencies approved by Lender (a "RATING AGENCY") and (ii) a
general policy rating of A or better and a financial class of VI or better by
A.M. Best Company, Inc. (or if a rating of A.M. Best Company, Inc. is no
longer available, a similar rating from a similar or successor service). In
addition, all policies shall (x)include a standard mortgagee clause, without
contribution, in the name of Lender and (y) provide that they shall not be
canceled, amended, or materially altered (including reduction in the scope or
limits of coverage) without at least thirty (30) days' prior notice to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i)
original or certified copies of all policies (and renewals) required under
this Section and (ii) receipts evidencing payment of all premiums on such
policies at least thirty (30) days prior to their expiration. If original and
renewal policies are unavailable or if coverage is under a blanket policy,
Borrower shall deliver duplicate originals, or, if unavailable, original
certificates evidencing that such policies are in full force and effect
together with certified copies of the original policies.
(e) General Provisions. Borrower shall not carry separate or
additional insurance concurrent in form or contributing in the event of loss
with that required under this Section unless endorsed in favor of Lender as
per this Section and approved by Lender in all respects. In the event of
foreclosure of this Instrument or other transfer of title or assignment of the
Property in extinguishment, in whole or in part, of the Obligations, all
right, title, and interest of Borrower in and to all policies of insurance
then in force regarding the Property and all proceeds payable thereunder and
unearned premiums thereon shall immediately vest in the purchaser or other
transferee of the Property. No approval by Lender of any insurer shall be
construed to be a representation, certification, or warranty of its solvency.
No approval by Lender as to the amount, type, or form of any insurance shall
be construed to be a representation, certification, or warranty of its
sufficiency.
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(5) (Lender acknowledges that the Property is located in an area
that is not considered to be at risk for earthquake damage
and, accordingly, Lender, as of the date of this Instrument,
has not required insurance against earthquake damage. Lender
reserves the right to require insurance against earthquake
damage if (i) Lender reasonably determines that the area in
which the Property is located is considered to be at risk
for earthquake damage, and (ii) Lender is generally
requiring such insurance of other borrowers of commercial
mortgage loans in the metropolitan Atlanta, Georgia area).
(6) (provided that Lender is generally requiring such insurance
of other borrowers of commercial mortgage loans in the
metropolitan Atlanta, Georgia area)
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Borrower shall comply with all insurance requirements and shall not cause or
permit any condition to exist which would be prohibited by an insurance
requirement or would invalidate the insurance coverage on the Property.
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY.
(a) Borrower's Obligations. If any damage to, loss, or destruction
of the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify
Lender and take all necessary steps to preserve any undamaged part of the
Property and (ii) if the insurance proceeds are made available for Restoration
(defined below) (but regardless of whether any proceeds are sufficient for
Restoration), Borrower shall promptly commence and diligently pursue to
completion the restoration, replacement, and rebuilding of the Property as
nearly as possible to its value and condition immediately prior to the Damage
or a Taking (defined below) in accordance with plans and specifications
approved by Lender ("RESTORATION"). Borrower shall comply with other
reasonable requirements established by Lender to preserve the security under
this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and Lender is authorized and
empowered by Borrower to settle, adjust, or compromise any claims for the
Damage; (ii) each insurance company concerned is authorized and directed to
make payment directly to Lender for the Damage; and (iii) Lender may apply the
insurance proceeds in any order it determines (1) to reimburse Lender for all
Costs (defined below) related to collection of the proceeds and (2) subject to
Section 3.07(c) and at Lender's option, to (A) payment (without any Prepayment
Premium) of all or part of the Obligations, whether or not then due and
payable, in the order determined by Lender (provided that if any Obligations
remains outstanding after this payment, the unpaid Obligations shall continue
in full force and effect and Borrower shall not be excused in the payment
thereof); (B) the cure of any default under the Documents; or (C) the
Restoration. Any insurance proceeds held by Lender shall be held without the
payment of interest thereon. If Borrower receives any insurance proceeds for
the Damage, Borrower shall promptly deliver the proceeds to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the insurance proceeds paid to Lender shall be deemed trust
funds and Lender may dispose of these proceeds as provided in this Section.
Borrower expressly assumes all risk of loss from any Damage, whether or not
insurable or insured against.
(c) Application of Proceeds to Restoration. Lender shall make the
Net Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least (7/) prior to the maturity of the Note and (B) Leases which
are terminated or terminable as a result of the Damage cover an aggregate of
less than (8/) of the total rentable square footage contained in the Property at
the closing of the Loan or such Tenants agree in writing to continue their
Leases; (iii) Borrower shall have entered into a general construction contract
acceptable in all respects to Lender for Restoration, which contract must
include provision for retainage of not less than ten percent (10%) until final
completion of the Restoration; and (iv) in Lender's reasonable judgment, after
Restoration has been completed the net cash flow of the Property will be
sufficient to cover all costs and operating expenses of the Property, including
payments due and reserves required under the Documents. Notwithstanding any
provision of this Instrument to the contrary, Lender shall not be obligated to
make any portion of the Net Proceeds available for Restoration unless, at the
time of the disbursement request, Lender has determined in its reasonable
discretion that (y) Restoration can be completed at a cost which does not exceed
the aggregate of the remaining Net
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(7) six (6) months
(8) twenty percent (20%)
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<PAGE> 15
Proceeds and any funds deposited with Lender by Borrower ("ADDITIONAL FUNDS")
and (z) the aggregate of any loss of rental income insurance proceeds which
the carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any
funds deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves
required under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to
make insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically
disbursed to Borrower shall be based upon the amounts currently due under the
construction contract for Restoration and Lender's receipt of (i) appropriate
lien waivers, (ii) a certification of the percentage of Restoration completed
by an architect or engineer acceptable to Lender, and (iii) title insurance
protection against materialmen's and mechanic's liens. At Lender's election,
the disbursement of funds may be handled by a disbursing agent selected by
Lender, and such agent's reasonable fees and expenses shall be paid by
Borrower. The Net Proceeds, Rent Loss Proceeds, and any Additional Funds shall
constitute additional security for the Loan and Borrower shall execute,
deliver, file and/or record, at its expense, such instruments as Lender
requires to grant to Lender a perfected, first-priority security interest in
these funds. If the Net Proceeds are made available for Restoration and (x)
Borrower refuses or fails to complete the Restoration, (y) an Event of Default
occurs, or (z) the Net Proceeds or Additional Funds are not applied to
Restoration, then any undisbursed portion may, at Lender's option, be applied
to the Obligations in any order of priority and any application to principal
shall be deemed a voluntary prepayment subject to the Prepayment Premium.
SECTION 3.08 CONDEMNATION.
(a) Borrower's Obligations. Borrower will promptly notify Lender
of any threatened or instituted proceedings for the condemnation or taking by
eminent domain of the Property including any change in any street (whether as
to grade, access, or otherwise) (a "TAKING"). Borrower shall, at its expense,
(i) diligently prosecute these proceedings, (ii) deliver to Lender copies of
all papers served in connection therewith, and (iii) consult and cooperate
with Lender in the handling of these proceedings. No settlement of these
proceedings shall be made by Borrower without Lender's prior written consent.
Lender may participate in these proceedings (but shall not be obligated to do
so) and Borrower will sign and deliver all instruments requested by Lender to
permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards,
judgments, decrees, or proceeds of sale in lieu of condemnation ("AWARD") are
assigned and shall be paid to Lender. Borrower authorizes Lender to collect
and receive them, to give receipts for them, to accept them in the amount
received without question or appeal, and/or to appeal any judgment, decree, or
award. Borrower will sign and deliver all instruments requested by Lender to
permit these actions.
(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, including the waiver of Prepayment Premium. If Borrower
receives any Award, Borrower shall promptly deliver it to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any
portion of the Award that is not for loss of value or property, Lender shall
permit the application of the Award to Restoration in accordance with the
provisions of Section 3.07 if: (i) no more than (A) twenty (20%) of the gross
area of the Improvements or (B) ten percent (10%) of the parking spaces is
affected by the Taking, (ii) the amount of the loss does not exceed twenty
percent (20%) of the original amount of the Note; (iii) the Taking does not
affect access to the Property
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<PAGE> 16
from any public right-of-way; (iv) there is no Event of Default at the time of
application; (v) after Restoration, the Property and its use will be in
compliance with all Laws; (vi) in Lender's reasonable judgment, Restoration is
practical and can be completed within one (1) year after the Taking and at
least (9/) prior to the maturity of the Note; and (vii) the Tenants listed in
Exhibit "D" ("MAJOR TENANTS") agree in writing to continue their Leases
without abatement of rent. Any portion of the Award that is (i) for loss of
value or property or (ii) in excess of the cost of any Restoration permitted
above, may, in Lender's sole discretion, be applied against the Obligations or
paid to Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking,
Borrower shall continue to pay and perform the Obligations as provided in the
Documents. Any reduction in the Obligations due to application of the Award
shall take effect only upon Lender's actual receipt and application of the
Award to the Obligations. If the Property shall have been foreclosed, sold
pursuant to any power of sale granted hereunder, or transferred by
deed-in-lieu of foreclosure prior to Lender's actual receipt of the Award,
Lender may apply the Award received to the extent of any deficiency upon such
sale and Costs incurred by Lender in connection with such sale.
SECTION 3.09 LIENS AND LIABILITIES. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and
others which, if unpaid, might result in a lien, security title, or
encumbrance on the Property or the Rents (collectively, "LIENS") and Borrower
shall, at its sole expense, do everything necessary to preserve the lien,
security title and security interest created by this Instrument and its
priority. Nothing in the Documents shall be deemed or construed as
constituting the consent or request by Lender, express or implied, to any
contractor, subcontractor, laborer, mechanic or materialman for the
performance of any labor or the furnishing of any material for any
improvement, construction, alteration, or repair of the Property. Borrower
further agrees that Lender does not stand in any fiduciary relationship to
Borrower. Any contributions made, directly or indirectly, to Borrower by or on
behalf of any of its partners, members, principals or any party related to
such parties shall be treated as equity and shall be subordinate and inferior
to the rights of Lender under the Documents.
SECTION 3.10 TAX AND INSURANCE DEPOSITS. (10/), Borrower shall make
monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12) of the
annual Assessments (except for income taxes, franchise taxes, ground rents,
maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit
any deficiency. Borrower shall promptly notify Lender of any changes to the
amounts, schedules and instructions for payment of the Impositions. Borrower
authorizes Lender or its agent to obtain the bills for Assessments directly
from the appropriate tax or governmental authority. All Deposits are pledged
to Lender and shall constitute additional security for the Obligations. The
Deposits shall be held by Lender without interest (except to the extent
required under Laws) and may be commingled with other funds. If (i) there is
no Event of Default at the time of payment, (ii) Borrower has delivered bills
or invoices to Lender for the Impositions in sufficient time to pay them when
due, (iii) the Deposits are sufficient to pay the Impositions or Borrower has
deposited the necessary additional amount, then Lender shall pay the
Impositions prior to their due date. Any Deposits remaining after payment of
the Impositions shall, at Lender's option, be credited against the Deposits
required for the following year or paid to Borrower. If an Event of Default
occurs, the Deposits may, at Lender's option, be applied to the Obligations in
any order of priority. Any application to principal shall be deemed a
voluntary prepayment subject to the Prepayment Premium. Borrower shall not
claim any credit against the principal and interest due
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(9) six (6) months
(10) Upon the occurrence of an Event of Default
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<PAGE> 17
under the Note for the Deposits. Upon an assignment or other transfer of this
Instrument, Lender may pay over the Deposits in its possession to the assignee
or transferee and then it shall be completely released from all liability with
respect to the Deposits. Borrower shall look solely to the assignee or
transferee with respect thereto. This provision shall apply to every transfer
of the Deposits to a new assignee or transferee. Subject to Article V, a
transfer of title to the Land shall automatically transfer to the new owner
the beneficial interest in the Deposits. Upon full payment and satisfaction of
this Instrument or, at Lender's option, at any prior time, the balance of the
Deposits in Lender's possession shall be paid over to the record owner of the
Land and no other party shall have any right or claim to the Deposits. Lender
may transfer all its duties under this Section to such service or financial
institution as Lender may periodically designate and Borrower agrees to make
the Deposits to such service or institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
"governmental plan" within the meaning of Section 3(32) of ERISA; (ii)
Borrower is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; (iii) the assets of the
Borrower do not constitute "plan assets" of one or more plans within the
meaning of 29 C.F.R. Section 2510.3-101; and (iv) one or more of the following
circumstances is true: (1) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less
than twenty-five percent (25%) of all equity interests in Borrower are held by
"benefit plan investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e). Borrower shall deliver to Lender such certifications
and/or other evidence periodically requested by Lender, in its sole
discretion, to verify these representations and warranties. Failure to deliver
these certifications or evidence, breach of these representations and
warranties, or consummation of any transaction which would cause this
Instrument or any exercise of Lender's rights under this Instrument to (i)
constitute a non-exempt prohibited transaction under ERISA or (ii) violate
ERISA or any state statute regulating governmental plans (collectively, a
"VIOLATION"), shall be an Event of Default. Notwithstanding anything in the
Documents to the contrary, no sale, assignment, or transfer of any direct or
indirect right, title, or interest in Borrower or the Property (including
creation of a junior lien, security title, encumbrance or leasehold interest)
shall be permitted which would, in Lender's opinion, negate Borrower's
representations in this Section or cause a Violation. At least fifteen (15)
days before consummation of any of the foregoing, Borrower shall obtain from
the proposed transferee or lienholder (i) a certification to Lender that the
representations and warranties of this Section will be true after consummation
and (ii) an agreement to comply with this Section.
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS.
(a) Environmental Representations and Warranties. (11/) Borrower
represents and warrants, to the best of Borrower's knowledge (after due
inquiry and investigation) and additionally based upon the environmental site
assessment report of the Property (the "ENVIRONMENTAL REPORT"), that except as
fully disclosed in the Environmental Report delivered to and approved by
Lender: (i) there are no Hazardous Materials (defined below) or underground
storage tanks affecting the Property ("AFFECTING THE PROPERTY" shall mean "in,
on, under, stored, used or migrating to or from the Property") except for (A)
routine office, cleaning, janitorial and other materials and supplies
necessary to operate the Property for its current use and (B) Hazardous
Materials that are (1) in compliance with Environmental Laws (defined below),
(2) have all required permits, and (3) are in only the amounts necessary to
operate the Property; (ii) there are no past, present or threatened Releases
(defined below) of Hazardous Materials in violation of any Environmental Law
affecting the Property; (iii) there is no past or present non-compliance with
Environmental Laws or with permits issued
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(11) Based solely upon the environmental reports prepared for
Lender,
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pursuant thereto; (iv) Borrower does not know of, and has not received, any
written or oral notice or communication from any person relating to Hazardous
Materials affecting the Property; and (v) Borrower has provided to Lender, in
writing, all information relating to environmental conditions affecting the
Property known to Borrower or contained in Borrower's files. "ENVIRONMENTAL
LAW" means any present and future federal, state and local laws, statutes,
ordinances, rules, regulations, standards, policies and other government
directives or requirements, as well as common law, that apply to Borrower or
the Property and relate to Hazardous Materials including the Comprehensive
Environmental Response, Compensation and Liability Act and the Resource
Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean petroleum and
petroleum products and compounds containing them, including gasoline, diesel
fuel and oil; explosives, flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and compounds containing them; lead and
lead-based paint; asbestos or asbestos-containing materials in any form that
is or could become friable; underground or above-ground storage tanks, whether
empty or containing any substance; any substance the presence of which on the
Property is prohibited by any federal, state or local authority; any substance
that requires special handling; and any other material or substance now or in
the future defined as a "hazardous substance," "hazardous material",
"hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or
"pollutant" within the meaning of any Environmental Law. "RELEASE" of any
Hazardous Materials includes any release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, pumping, pouring, escaping, dumping,
disposing or other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that:
(i) all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (c) with
all required permits, and (D) (1) in only the amounts necessary to operate the
Property or (2) fully disclosed to and approved by Lender in writing; (iv)
Borrower shall keep the Property free and clear of all liens and encumbrances
imposed by any Environmental Laws due to any act or omission by Borrower or
any person (the "ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole
expense, fully and expeditiously cooperate in all activities in Section
3.12(c) including providing all relevant information and making knowledgeable
persons available for interviews; (vi) Borrower shall, at its sole expense,
(A) perform any environmental site assessment or other investigation of
environmental conditions at the Property upon Lender's request based on
Lender's reasonable belief that the Property is not in compliance with all
Environmental Laws, (B) share with Lender the results and reports and Lender
and the Indemnified Parties (defined below) shall be entitled to rely on such
results and reports, and (c) complete any remediation of Hazardous Materials
affecting the Property or other actions required by any Environmental Laws;
(vii) Borrower shall not allow any Tenant or other user of the Property to
violate any Environmental Law; and (viii) Borrower shall immediately notify
Lender in writing after it becomes aware of (A) the presence, Release, or
threatened Release of Hazardous Materials affecting the Property, (B) any
non-compliance of the Property with any Environmental Laws, (C) any actual or
potential Environmental Lien, (D) any required or proposed remediation of
environmental conditions relating to the Property, or (E) any written or oral
communication or notice from any person relating to Hazardous Materials. Any
failure of Borrower to perform its obligations under this Section 3.12 shall
constitute bad faith waste of the Property.
(c) Lender's Rights. Lender and any person designated by Lender
may enter the Property to assess the environmental condition of the Property
and its use including (i) conducting any environmental assessment or audit
(the scope of which shall be determined by Lender) and (ii) taking samples of
soil, groundwater or other water, air, or building materials, and conducting
other invasive testing at all reasonable times when (A) a default has occurred
under the Documents, (B) Lender reasonably believes that a Release has
occurred or the Property is not in compliance with all Environmental Laws, or
(C) the Loan is being considered for sale. Borrower shall cooperate with and
provide access to Lender and such person.
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SECTION 3.13 (12/)
SECTION 3.14 INSPECTION. Borrower shall allow Lender and any person
designated by Lender (13/) to enter upon the Property and conduct tests or
inspect the Property at all reasonable times. Borrower shall assist Lender and
such person in effecting said inspection.
SECTION 3.15 RECORDS, REPORTS, AND AUDITS.
(a) Records and Reports. Borrower shall maintain, in accordance
with generally-accepted accounting principles ("GAAP"), complete and accurate
books and records with respect to all operations of or transactions involving
the Property. Annually, Borrower shall furnish Lender financial statements for
the most current fiscal year (including a schedule of all related Obligations
and contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (14/) (iii) any guarantors
or sureties of the Note. Annually (or quarterly upon Lender's request),
Borrower shall furnish Lender (i) operating statements for the Property
including income and expenses (before and after Obligations service), major
capital improvements; (ii) copies of paid tax receipts for the Property;
(iii) a certified rent roll including security deposits held, the expiration
of the terms of the Leases, and identification and explanation of any Tenants
in default; (iv) (15/) a budget showing projected income and expenses (before
and after Obligations service) for the next twelve (12) month budget period;
and (v) upon Lender's request (16/), (A) a schedule showing the Borrower's tax
basis in the Property, (B) the distribution of economic interests in the
Property, and (C) copies of any other loan documents affecting the Property.
(b) Delivery of Reports. All of the reports, statements, and
items required under this Section shall be (i) certified as being true,
correct, and accurate by an authorized person, partner, or officer of the
delivering party or, at the deliverer's option, audited by a Certified Public
Accountant; (ii) prepared in accordance with GAAP and satisfactory to Lender
in form and substance; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual reports and (B) fifteen (15) days
after the end of each calendar quarter for quarterly reports. If any one
report, statement, or item is not received by Lender on its due date, a late
fee of Five Hundred and No/100 Dollars ($500.00) per month shall be due and
payable by Borrower. If any one report, statement, or item is not received
within thirty (30) days of its due date, Lender may immediately declare (17/)
under the Documents. Borrower shall (i) provide Lender with such additional
financial, management, or other information regarding Borrower, any general
partner of Borrower, or the Property, as
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(12) [Intentionally Omitted]
(13) , upon at least two (2) days advance notice from Lender to
Borrower (except that no such notice shall be required in
the event of an emergency),
(14) and
(15) upon Lender's request (and in no event more often than once
every two (2) years during the term of this Loan),
(16) following the occurrence of an Event of Default
(17) a default
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<PAGE> 20
Lender may reasonably request and (ii) upon Lender's request (18/), deliver all
items required by Section 3.15 in an electronic format (i.e., on computer
disks) or by electronic transmission acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any
person designated by Lender to examine, audit, and make copies of all such
books and records and all supporting data at the place where these items are
located at all reasonable times after reasonable advance notice; provided that
no notice shall be required after any default under the Documents. Borrower
shall assist Lender in effecting such examination. Upon five (5) days' prior
notice, Lender may inspect and make copies of Borrower's or any general
partner of Borrower's income tax returns with respect to the Property for the
purpose of verifying any items referenced in this Section.
SECTION 3.16 BORROWER'S CERTIFICATES. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors as to (a) the amount of the Obligations outstanding; (b) the
interest rate, terms of payment, and maturity date of the Note; (c) the date
to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any
listed; (e) whether all Leases are in full force and effect and have not been
modified (or if modified, setting forth all modifications); (f) the date to
which the Rents have been paid; (g) whether, to the best knowledge of
Borrower, any defaults exist under the Leases and a detailed description of
any listed; (h) the security deposit held by Borrower under each Lease and
that such amount is the amount required under such Lease; (i) whether there
are any defaults (or events which with the passage of time and/or notice would
constitute a default) under the Documents and a detailed description of any
listed; (j) whether the Documents are in full force and effect; and (k) any
other matters reasonably requested by Lender related to the Leases, the
Obligations, the Property, or the Documents. For all non-residential
properties and promptly upon Lender's request, Borrower shall use its best
efforts to deliver a written certification to Lender and Investors from
Tenants specified by Lender that: (a) their Leases are in full force and
effect; (b) there are no defaults (or events which with the passage of time
and/or notice would constitute a default) under their Leases or a detailed
description of any listed; (c) none of the Rents have been paid more than one
month in advance; (d) there are no offsets or defenses against the Rents and a
detailed description of any listed; and (e) any other matters reasonably
requested by Lender related to the Leases; provided, however, that Borrower
shall not have to pay money to a Tenant to obtain such certification, but it
will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties and representations of
Borrower.
SECTION 3.18 ADDITIONAL SECURITY. No other security now existing or taken
later to secure the Obligations shall be affected by the execution of the
Documents and all additional security shall be held as cumulative. The taking
of additional security, execution of partial releases, or extension of the
time of payment obligations of Borrower shall not diminish the effect,
security title, and security interest of this Instrument and shall not affect
the liability or obligations of any maker or guarantor. Neither the acceptance
of the Documents nor their enforcement shall prejudice or affect Lender's
right to realize upon or enforce any other security now or later held by
Lender. Lender may enforce the Documents or any other security in such order
and manner as it may determine in its discretion.
SECTION 3.19 FURTHER ACTS. Borrower shall take all necessary actions to (i)
keep valid and effective the security title, security interest and rights of
Lender under the Documents and (ii) protect the lawful owner of the Documents.
Promptly upon request by Lender and at Borrower's expense, Borrower shall
execute additional instruments and take such actions as Lender reasonably
believes are necessary or desirable to (a) maintain or grant Lender a
first-priority, perfected security title and security interest in the
Property, (b) correct any error
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(18) and if readily achievable without significant expenditure by
Borrower
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or omission in the Documents, and (c) effect the intent of the Documents,
including filing/recording the Documents, additional deeds to secure debt,
financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 EXPENSES AND ADVANCES. Borrower shall pay all reasonable
appraisal, recording, filing, registration, brokerage, abstract, title
insurance (including premiums), U.C.C. search, escrow, attorneys' (both
in-house staff and retained attorneys), engineers', environmental engineers',
environmental testing, and architects' fees, costs (including travel),
expenses, and disbursements incurred by Borrower or Lender in connection with
the granting, closing, servicing, and enforcement of (a) the Loan and
Documents or (b) attributable to Borrower as owner of the Property. The term
"COSTS" shall mean any of the foregoing incurred in connection with (a) any
default by Borrower under the Documents, (b) the servicing of the Loan, or (c)
the exercise, enforcement, compromise, defense, litigation, or settlement of
any of Lender's rights or remedies under the Documents or relating to the Loan
or the Obligations. If Borrower fails to pay any amounts or perform any
actions required under the Documents, Lender may (but shall not be obligated
to) advance sums to pay such amounts or perform such actions. Borrower grants
Lender the right to enter upon and take possession of the Property to prevent
or remedy any such failure and the right to take such actions in Borrower's
name. No advance or performance shall be deemed to have cured a default by
Borrower. All (a) sums advanced by or payable to Lender per this Section or
under applicable Laws, (b) except as expressly provided in the Documents,
payments due under the Documents which are not paid in full when due, and (c)
all Costs, shall: (i) be deemed demand obligations, (ii) bear interest at the
applicable interest rate specified in the Note, which shall be the Default
Rate unless prohibited by Laws, until paid if not paid on demand, (iii) be
part of, together with such interest, the Obligations, and (iv) be secured by
the Documents. Lender, upon making any such advance, shall also be subrogated
to rights of the person receiving such advance.
SECTION 4.02 SUBROGATION. If any proceeds of the Note were used to
extinguish, extend or renew any indebtedness on the Property, then, to the
extent of the funds so used, (a) Lender shall be subrogated to all rights,
claims, liens, titles and interests existing on the Property held by the
holder of such indebtedness and (b) these rights, claims, liens, titles and
interests are not waived but rather shall (i) continue in full force and
effect in favor of Lender and (ii) are merged with the security title and
security interest created by the Documents as cumulative security for the
payment and performance of the Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE. It shall be an Event of Default
and, at the sole option of Lender, Lender may accelerate the Obligations and
the entire Obligations (including any Prepayment Premium) shall become
immediately due and payable, if Borrower, without Lender's prior written
consent (which may be withheld for any or no reason including the possibility
of an ERISA violation or the proposed transferee's failure to agree in writing
to Lender increasing the interest payable on the Obligations to any rate,
changing any other terms (including maturity) of the Obligations or Documents,
or requiring the payment of a transfer fee), (a) shall sell, convey, assign,
transfer, dispose of or be divested of its title to, convey security title to,
mortgage, encumber or cause to be encumbered (except for the imposition of
mechanics' or materialmen's liens) the Property or any interest therein, in
any manner or way, whether voluntary or involuntary, or (b) in the event of
(i) any merger, consolidation (19/), sale, transfer, assignment, or dissolution
involving all or substantially all of the assets of Borrower or any general
partner of Borrower, (ii) the transfer, pledge, voluntary or involuntary sale,
or
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(19) (unless Borrower or such general partner of Borrower is the
surviving entity in such merger or consolidation)
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<PAGE> 22
encumbrance (or any of the foregoing (20/) ) of (A) (21/) or more of (1) the
voting stock of a corporate Borrower, any corporate general partner of
Borrower, or any corporation directly or indirectly owning (22/) or more of any
such corporation, (2) the beneficial interests in Borrower if a trust or the
interest in any owner of fifty percent (50%) or more of such beneficial
interests, or (3) the ownership interests in Borrower or any general partner
of Borrower if either is a limited liability company; (B) any general
partnership interest in Borrower; or (C) any partnership which is a direct or
indirect general partner of Borrower or any general partner of Borrower; (iii)
the conversion of any general partnership interest in Borrower to a limited
partnership interest; (iv) any change, removal, or resignation of any general
partner of Borrower; or (v) any change, removal, or resignation of a managing
member (or if no managing member, any member) if Borrower is a limited
liability company. This provision shall not apply to transfers under any will
or applicable law of descent. This provision does not prohibit the transfer of
any existing limited partnership interest in (i) Borrower, (ii) any general
partner of Borrower, or (iii) any partner of a general partner of Borrower (23/)
.
SECTION 5.02 ONE-TIME TRANSFER. (24/) Section 5.01 and so long as there is
no default under the Documents (or event which with the passage of time or the
giving of notice or both would be a default), Lender agrees, upon thirty (30)
days prior written request, to consent to one transfer of the entire Property
(25/) if:
(i) the proposed transferee of the Property is a person which, in
the judgment of Lender, has financial capability and creditworthiness,
reputation and experience in the ownership, operation, management, and leasing
of similar properties, equal to or greater than Borrower;
(ii) at the time of transfer the Loan to Value Ratio (defined
below) does not exceed sixty-five percent (65%);
(iii) Borrower pays Lender a non-refundable servicing fee (26/) at
the time of the request and an additional fee equal to 1.0% of the outstanding
principal balance of the Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to
verify the first priority of the Documents at Borrower's expense;
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(20) in one transaction
(21) 49%
(22) 49%
(23) Notwithstanding the foregoing, if Borrower or a corporate
general partner of Borrower is a corporation whose shares
are traded on a major stock exchange, the transfer of such
shares shall in no event constitute a default under this
Instrument.
(24) Beginning six (6) months from Closing, and notwithstanding
(25) (with all terms and conditions of the Loan Documents
remaining the same)
(26) of $2,500.00
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<PAGE> 23
(v) the Debt Service Coverage Ratio (defined below) is at least
1.60 to 1.00 for the preceding (27/) month period and Lender receives
satisfactory evidence that this Debt Service Coverage Ratio will be maintained
for the next succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under the
Documents and executes any documents reasonably required by Lender, and all of
these documents are satisfactory in form and substance to Lender;
(vii) Lender reasonably approves the form and content of all
transfer documents, and Lender is furnished with a certified copy of the
recorded transfer documents;
(viii) the transferee complies with and delivers the ERISA
Certification and Environmental Indemnity Agreement, both of even date
herewith; and
(ix) Borrower or the transferee pays all reasonable fees, costs,
and expenses incurred by Lender in connection with the proposed transfer,
including, without limitation, all legal (for both outside counsel and
Lender's staff attorneys), accounting, title insurance, documentary stamps
taxes, intangible taxes, mortgage taxes, recording fees, and appraisal fees,
whether or not the transfer is actually consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably
determined by Lender, of (i) the aggregate principal balance of all
encumbrances against the Obligations to (ii) the fair market value of the
Property. The term "DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as
reasonably determined by Lender, calculated by dividing (i) net operating
income ("NOI") by (ii) total annual debt service ("TADS"). NOI is the gross
annual income realized from operations of the Obligations for the applicable
twelve (12) month period after subtracting all necessary and ordinary
operating expenses (both fixed and variable) for that twelve (12) month period
(assuming for expense purposes only that the Property is 95% leased and
occupied if actual leasing is less than 95%), including, without limitation,
utilities, administrative, cleaning, landscaping, security, repairs, and
maintenance, ground rent payments, management fees, reserves for replacements,
real estate and other taxes, assessments and insurance, but excluding
deduction for federal, state and other income taxes, debt service expenses,
depreciation or amortization of capital expenditures, and other similar
non-cash items. Gross income shall not be anticipated for any greater time
period than that approved by generally accepted accounting principles and
ordinary operating expenses shall not be prepaid. Documentation of NOI and
expenses shall be certified by an officer of Borrower with detail satisfactory
to Lender and shall be subject to the approval of Lender. TADS shall mean the
aggregate debt service payments for any given calendar year on the Loan and on
all other indebtedness secured, or to be secured, by any part of the (28/) .
SECTION 5.03 PERMITTED TRANSFERS WITHOUT FEE. Notwithstanding Section 5.01,
the original Borrower, and any transferee of the original Borrower permitted
below, may engage in the transactions described below after at least fifteen
(15) days' prior written notice to Lender, provided that all of the following
conditions are met: (i) there is no default under the Documents (or event
which with the passage of time or the giving of notice or both would be a
default); (ii) the proposed transferee complies with and delivers the ERISA
certification and indemnification agreement described herein (or, if the
statements required by the certification are not true with respect to the
proposed transferee, Lender shall have received such evidence as it may
require in its sole discretion to determine that the proposed transfer is not
and would not render the Loan a prohibited transaction under ERISA); (iii) if
all of the Property is transferred, the proposed transferee shall have signed
an assumption agreement acceptable to Lender with respect to the Documents;
(iv) the proposed transferee shall have provided such information about the
proposed transferee as requested by Lender, and Lender shall have approved the
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(27) six (6)
(28) Property
18
<PAGE> 24
proposed transferee, including, but not limited to, a review of the proposed
transferee's creditworthiness, good character and reputation, and demonstrated
ability and experience (by itself or through its manager) in the ownership,
operation, and leasing of property similar to the Property; and (v) payment by
Borrower or the proposed transferee of (1) all costs and expenses incurred by
Lender for the processing of said transfer including a processing fee, (2) any
documentary stamp taxes, intangibles taxes, recording fees, and other costs
and expenses required in connection with the assumption agreement and any
modification of the Documents, and (3) all other costs and expenses (including
attorneys' fees and expenses for Lender's staff attorneys and outside counsel)
of the preparation of the assumption agreement and any modification of the
Documents. Provided all of the foregoing conditions are fulfilled with respect
to each such transfer, Borrower may engage in the following transaction:
(a) Borrower may transfer the entire Property (or all the
ownership interests in borrower) to Roberts Realty
Investors, Inc. ("RRII"), a real estate investment trust.
Lender shall not be entitled to accelerate the indebtedness
evidenced by the Note nor change the Loan terms in the event
of a conveyance to RRII; and
(b) Any merger or consolidation of Borrower or a general partner
of Borrower when borrower or such general partner is the
surviving entity.
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT. The following shall be an "EVENT OF
DEFAULT":
(a) if Borrower fails to make any payment required under the
Documents when due and such failure continues for five (5) days after written
notice; provided, however, that if Lender gives one (1) notice of default
within any twelve (12) month period, Borrower shall have no further right to
any notice of monetary default during that twelve (12) month period;
(b) except for defaults listed in the other subsections of this
Section 6.01, if Borrower fails to perform or comply with any other provision
contained in the Documents and the default is not cured within thirty (30)
days after written notice (the "GRACE PERIOD"); provided, however, that Lender
may extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the
Grace Period but can be cured within ninety (90) days after the default, (2)
no security title or security interest created by the Documents will be
impaired prior to completion of such cure, and (3) Lender's immediate exercise
of any remedies provided hereunder or by law is not necessary for the
protection or preservation of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer
in fraud of creditors, (iii) make an assignment for the benefit of its
creditors, (iv) not be able to pay its debts as such debts become due, or (v)
admit in writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency,
or liquidation proceeding, or any other proceedings for the relief of debtors,
is instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
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<PAGE> 25
(g) if any of the events in Sections 6.01 (e) or (f) shall occur
with respect to any (i) general partner of Borrower or (ii) guarantor of
payment or performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower;
(i) if any default occurs under the Environmental and ERISA
Indemnity Agreement and such default is not cured within any applicable grace
period in that document;
(j) if Borrower shall fail at any time to obtain, maintain,
renew, or keep in force the insurance policies required by Section 3.06 within
ten (10) days after written notice;
(k) if Borrower shall be in default under any other mortgage,
deed of trust, deed to secure debt or security agreement covering any part of
the Property, whether it be superior or junior in lien or security title to
this Instrument;
(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be upheld by
any court of competent jurisdiction or shall be consented to by Borrower; or
(m) (i) the consummation by Borrower of any transaction which
would cause (A) the Loan or any exercise of Lender's rights under the
Documents to constitute a non-exempt prohibited transaction under ERISA or (B)
a violation of a state statute regulating governmental plans; (ii) the failure
of any representation in Section 3.11 to be true and correct in all respects;
or (iii) the failure of Borrower to provide Lender with the written
certifications required by Section 3.11.
SECTION 6.02 REMEDIES. If an Event of Default occurs, Lender or any person
designated by Lender may (but shall not be obligated to) take any action
(separately, concurrently, cumulatively, and at any time and in any order)
permitted under any Laws, without notice, demand, presentment, or protest (all
of which are hereby waived), to protect and enforce Lender's rights under the
Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations
immediately due and payable, except for defaults under Section 6.01 (f), (g),
or (h) which shall automatically make the Obligations immediately due and
payable;
(b) judicially or otherwise, (i) completely foreclose this
Instrument or (ii) partially foreclose this Instrument for any portion of the
Obligations due and the security title and security interest created by this
Instrument shall continue unimpaired and without loss of priority as to the
remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right,
title and interest of Borrower therein and rights of redemption thereof,
pursuant to power of sale;
(d) recover judgment on the Note either before, during or after
any proceedings for the enforcement of the Documents and without any
requirement of any action being taken to (i) realize on the Property or (ii)
otherwise enforce the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B)
the solvency of Borrower or any person liable for the payment of the
Obligations; and Borrower and any person so liable waives or shall be deemed
to have waived the foregoing and any other objections to the fullest extent
permitted by Laws and consents or shall be deemed to have consented to such
appointment;
(g) with or without entering upon the Property, (i) exclude
Borrower and any person from the Property without liability for trespass,
damages, or otherwise; (ii) take possession of, and Borrower shall
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<PAGE> 26
surrender on demand, all books, records, and accounts relating to the
Property; (iii) give notice to Tenants or any person, make demand for,
collect, receive, sue for, and recover in its own name all Rents and cash
collateral derived from the Property; (iv) use, operate, manage, preserve,
control, and otherwise deal with every aspect of the Property including (A)
conducting its business, (B) insuring it, (C) making all repairs, renewals,
replacements, alterations, additions, and improvements to or on it, (D)
completing the construction of any Improvements in manner and form as Lender
deems advisable, and (E) executing, modifying, enforcing, and terminating new
and existing Leases on such terms as Lender deems advisable and evicting any
Tenants in default; (v) apply the receipts from the Property to payment of the
Obligations, in any order or priority determined by Lender, after first
deducting all Costs, expenses, and liabilities incurred by Lender in
connection with the foregoing operations and all amounts needed to pay the
Impositions and other expenses of the Property, as well as just and reasonable
compensation for the services of Lender and its attorneys, agents, and
employees; and/or (vi) in every case in connection with the foregoing,
exercise all rights and powers of Borrower or Lender with respect to the
Property, either in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration,
if any, as Lender may require without, as to the remainder of the Property,
impairing or affecting the security title or priority of this Instrument or
improving the position of any subordinate lien or security title holder with
respect thereto, except to the extent that the Obligations shall have been
actually reduced, and Lender may accept by assignment, pledge, or otherwise
any other property in place thereof as Lender may require without being
accountable for so doing to any other lien or security title holder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property
State including (i) the right to take possession of all tangible and
intangible personal property included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender deems advisable for the care,
protection and preservation of the Personal Property and (ii) request Borrower
at its expense to assemble the Personal Property and make it available to
Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Personal
Property sent to Borrower at least five (5) days prior to such action shall
constitute commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws. If Lender
exercises any of its rights under Section 6.02(g), Lender shall not (a) be
deemed to have entered upon or taken possession of the Property except upon
the exercise of its option to do so, evidenced by its demand and overt act for
such purpose; (b) be deemed a beneficiary or mortgagee in possession by reason
of such entry or taking possession; nor (c) be liable (i) to account for any
action taken pursuant to such exercise other than for Rents actually received
by Lender, (ii) for any loss sustained by Borrower resulting from any failure
to lease the Property, or (iii) any other act or omission of Lender except for
losses caused by Lender's willful misconduct or gross negligence. Borrower
hereby consents to, ratifies, and confirms the exercise by Lender of its
rights under this Instrument and appoints Lender as its attorney-in-fact,
which appointment shall be deemed to be coupled with an interest and
irrevocable, for such purposes.
SECTION 6.03 EXPENSES. All Costs, expenses, or other amounts paid or
incurred by Lender in the exercise of its rights under the Documents, together
with interest thereon at the applicable interest rate specified in the Note,
which shall be the Default Rate unless prohibited by Laws, shall be (a) part
of the Obligations, (b) secured by this Instrument, and (c) allowed and
included as part of the Obligations in any foreclosure, decree for sale, power
of sale, or other judgment or decree enforcing Lender's rights under the
Documents.
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SECTION 6.04 RIGHTS PERTAINING TO SALES. To the extent permitted under
(and in accordance with) any Laws, the following provisions shall, as Lender
may determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower waives any
right to require otherwise; (b) any sale may be postponed or adjourned by
public announcement at the time and place appointed for such sale or for such
postponed or adjourned sale without further notice; and (c) Lender may acquire
the Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 APPLICATION OF PROCEEDS. Any proceeds received from any sale
or disposition under Article VI or otherwise, together with any other sums
held by Lender, shall, except as expressly provided to the contrary, be
applied in the order determined by Lender to: (a) payment of all Costs and
expenses of any enforcement action or foreclosure sale, including interest
thereon at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws, (b) all taxes, Assessments, and
other charges unless the Property was sold subject to these items; (c) payment
of the Obligations in such order as Lender may elect; (d) payment of any other
sums secured or required to be paid by Borrower; and (e) payment of the
surplus, if any, to any person lawfully entitled to receive it. Borrower and
Lender intend and agree that during any period of time between any foreclosure
judgment that may be obtained and the actual foreclosure sale that the
foreclosure judgment will not extinguish the Documents or any rights contained
therein including the obligation of Borrower to pay all Costs and to pay
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES. No failure, refusal,
waiver, or delay by Lender to exercise any rights under the Documents upon any
default or Event of Default shall impair Lender's rights or be construed as a
waiver of, or acquiescence to, such or any subsequent default or Event of
Default. No recovery of any judgment by Lender and no levy of an execution
upon the Property or any other property of Borrower shall affect the security
title and security interest created by this Instrument and such liens,
security title, rights, powers, and remedies shall continue unimpaired as
before. Lender may resort to any security given by this Instrument or any
other security now given or hereafter existing to secure the Obligations, in
whole or in part, in such portions and in such order as Lender may deem
advisable, and no such action shall be construed as a waiver of any of the
liens, security title, rights, or benefits granted hereunder. Acceptance of
any payment after any Event of Default shall not be deemed a waiver or a cure
of such Event of Default and such acceptance shall be deemed an acceptance on
account only. If Lender has started enforcement of any right by foreclosure,
sale, entry, or otherwise and such proceeding shall be discontinued,
abandoned, or determined adversely for any reason, then Borrower and Lender
shall be restored to their former positions and rights under the Documents
with respect to the Property, subject to the security title and security
interest hereof.
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES. To the fullest extent Borrower
may do so under Laws, Borrower (a) will not at any time insist on, plead,
claim, or take the benefit of any statute or rule of law now or later enacted
providing for any appraisement, valuation, stay, extension, moratorium,
redemption, or any statute of limitations; (b) for itself, its successors and
assigns, and for any person ever claiming an interest in the Property (other
than Lender), waives and releases all rights of redemption, reinstatement,
valuation, appraisement, notice of intention to mature or declare due the
whole of the Obligations, all rights to a marshaling of the assets of
Borrower, including the Property, or to a sale in inverse order of alienation,
in the event of foreclosure of the security title and security interests
created under the Documents; (c) shall not be relieved of its obligation to
pay the Obligations as required in the Documents nor shall the lien, security
title or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder
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<PAGE> 28
of any subordinate lien, security title, security interest, encumbrance,
right, title, or interest in or to the Property, Lender may (a) release any
person liable for payment of the Obligations or any portion thereof or any
part of the security held for the Obligations or (b) modify any of the
provisions of the Documents without impairing or affecting the Documents or
the security title, security interest, or the priority of the modified
Documents as security for the Obligations over any such subordinate lien,
security title, security interest, encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 SECURITY AGREEMENT. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and
intangible rights and interest of Borrower in the Property. Borrower grants to
Lender, as security for the Obligations, a security interest in the Personal
Property to the fullest extent that the same may be subject to the U.C.C.
Borrower authorizes Lender to file any financing or continuation statements
and amendments thereto relating to the Personal Property without the signature
of Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 LIMITED RECOURSE LIABILITY. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
SECTION 8.02 GENERAL INDEMNITY. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not
an owner or operator of the Property, Borrower shall, at its sole expense,
protect, defend, release, indemnify and hold harmless ("INDEMNIFY") the
Indemnified Parties (defined below) from any Losses (defined below) imposed
on, incurred by, or asserted against the Indemnified Parties, directly or
indirectly, arising out of or in connection with the Property, Loan, or
Documents, including Losses; provided, however, that the foregoing indemnities
shall not apply to any Losses caused by the gross negligence or willful
misconduct of the Indemnified Parties. The term "LOSSES" shall mean any
claims, suits, liabilities (including strict liabilities), actions,
proceedings, obligations, debts, damages, losses, Costs, expenses, fines,
penalties, charges, fees, judgments, awards, and amounts paid in settlement of
whatever kind including attorneys' fees (both in-house staff and retained
attorneys) and all other costs of defense. The term "INDEMNIFIED PARTIES"
shall mean (a) Lender, (b) any prior owner or holder of the Note, (c) any
existing or prior servicer of the Loan, (d) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing, and
(e) the heirs, legal representatives, successors and assigns of each of the
foregoing.
SECTION 8.03 TRANSACTION TAXES INDEMNITY. Borrower shall, at its sole
expense, indemnify the Indemnified Parties from all Losses imposed upon,
incurred by, or asserted against the Indemnified Parties or the Documents
relating to Transaction Taxes.
SECTION 8.04 ERISA INDEMNITY. Borrower shall, at its sole expense,
indemnify the Indemnified Parties against all Losses imposed upon, incurred
by, or asserted against the Indemnified Parties (a) as a result of a
Violation, (b) in the investigation, defense, and settlement of a Violation,
(c) as a result of a breach of the representations in Section 3.11 or default
thereunder, (d) in correcting any prohibited transaction or the sale of a
prohibited loan, and (e) in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion.
SECTION 8.05 ENVIRONMENTAL INDEMNITY. Borrower and other persons, if any,
have executed and delivered the Environmental and ERISA Indemnity Agreement
dated the date hereof to Lender ("ENVIRONMENTAL INDEMNITY").
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<PAGE> 29
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, the Indemnified Parties
may, in their sole discretion, engage their own attorneys and professionals to
defend or assist them and, at their option, their attorneys shall control the
resolution of any claims or proceedings. Upon demand, Borrower shall pay or,
in the sole discretion of the Indemnified Parties, reimburse and/or indemnify
the Indemnified Parties for all Costs imposed on, incurred by, or asserted
against the Indemnified Parties by reason of any items set forth in this
Article VIII and/or the enforcement or preservation of the Indemnified
Parties' rights under the Documents. Any amount payable to the Indemnified
Parties under this Section shall (a) be deemed a demand obligation, (b) be
part of the Obligations, (c) bear interest at the applicable interest rate
specified in the Note, which shall be the Default Rate unless prohibited by
Laws, until paid if not paid on demand, and (d) be secured by this Instrument.
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL. Notwithstanding anything to
the contrary in the Documents and in addition to the recourse obligations in
the Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and
8.06 shall be a full recourse obligation of Borrower, shall not be subject to
any limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, assignment or
foreclosure of this Instrument, (c) the acceptance by Lender (or any nominee)
of a deed in lieu of foreclosure, (d) a plan of reorganization filed under the
Bankruptcy Code, or (e) the exercise by the Lender of any rights in the
Documents. Borrower's obligations under Article VIII shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation under any
applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 USURY SAVINGS CLAUSE. All agreements in the Documents are
expressly limited so that in no event whatsoever shall the amount paid or
agreed to be paid under the Documents for the use, forbearance, or detention
of money exceed the highest lawful rate permitted by Laws. If, at the time of
performance, fulfillment of any provision of the Documents shall involve
transcending the limit of validity prescribed by Laws, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity. If
Lender shall ever receive as interest an amount which would exceed the highest
lawful rate, the receipt of such excess shall be deemed a mistake and (a)
shall be canceled automatically or (b) if paid, such excess shall be (i)
credited against the principal amount of the Obligations to the extent
permitted by Laws or (ii) rebated to Borrower if it cannot be so credited
under Laws. Furthermore, all sums paid or agreed to be paid under the
Documents for the use, forbearance, or detention of money shall to the extent
permitted by Laws be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum lawful
rate of interest from time to time in effect and applicable to the Obligations
for so long as the Obligations is outstanding.
SECTION 9.02 NOTICES. Any notice, request, demand, consent, approval,
direction, agreement, or other communication (any "NOTICE") required or
permitted under the Documents shall be in writing and shall be validly given
if sent by a nationally-recognized courier that obtains receipts, delivered
personally by a courier that obtains receipts, or mailed by United States
certified mail (with return receipt requested and postage prepaid) addressed
to the applicable person as follows:
24
<PAGE> 30
<TABLE>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
ROBERTS PROPERTIES RESIDENTIAL, L.P. HOLT NEY ZATCOFF & WASSERMAN, LLP
c/o Roberts Properties, Inc. 100 Galleria Parkway, Suite 600
8010 Roswell Road, Suite 120 Atlanta, Georgia 30339
Atlanta, Georgia 30350 Attention: Gregory A. Randall, Esq.
Attention: Charles R. Elliott
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 103 461 Reference Loan No. 6 103 461
</TABLE>
Each notice shall be effective upon being so sent, delivered, or mailed, but
the time period for response or action shall run from the date of receipt as
shown on the delivery receipt. Refusal to accept delivery or the inability to
deliver because of a changed address for which no notice was given shall be
deemed receipt. Any party may periodically change its address for notice and
specify up to two (2) additional addresses for copies by giving the other
party at least ten (10) days' prior notice.
SECTION 9.03 SOLE DISCRETION OF LENDER. Except as otherwise expressly
stated, whenever Lender's judgment, consent, or approval is required or Lender
shall have an option or election under the Documents, such judgment, the
decision as to whether or not to consent to or approve the same, or the
exercise of such option or election shall be in the sole and absolute
discretion of Lender.
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION. The Documents
shall be governed by and construed in accordance with the laws of the Property
State and the applicable laws of the United States of America. Without
limiting Lender's right to bring any action or proceeding against Borrower or
the Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any
state or federal court in the Property State, (b) agrees that any Action may
be heard and determined in such court, and (c) waives, to the fullest extent
permitted by Laws, the defense of an inconvenient forum to the maintenance of
any Action in such jurisdiction.
SECTION 9.05 CONSTRUCTION OF PROVISIONS. The following rules of
construction shall apply for all purposes of this Instrument unless the
context otherwise requires: (a) all references to numbered Articles or
Sections or to lettered Exhibits are references to the Articles and Sections
hereof and the Exhibits annexed to this Instrument and such Exhibits are
incorporated into this Instrument as if fully set forth in the body of the
Instrument; (b) all Article, Section, and Exhibit captions are used for
convenience and reference only and in no way define, limit, or in any way
affect this Instrument; (c) words of masculine, feminine, or neuter gender
shall mean and include the correlative words of the other genders, and words
importing the singular number shall mean and include the plural number, and
vice versa; (d) no inference in favor of or against any party shall be drawn
from the fact that such party has drafted any portion of this Instrument; (e)
all obligations of Borrower hereunder shall be performed and satisfied by or
on behalf of Borrower at Borrower's sole expense; (f) the terms "INCLUDE,"
"INCLUDING," and similar terms shall be construed as if followed by the phrase
"WITHOUT BEING LIMITED TO"; (g) the terms "PROPERTY," "LAND," "IMPROVEMENTS,"
and "PERSONAL PROPERTY" shall be construed as if followed by
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<PAGE> 31
the phrase "OR ANY PART THEREOF"; (h) the term "OBLIGATIONS" shall be
construed as if followed by the phrase "OR ANY OTHER SUMS SECURED HEREBY, OR
ANY PART THEREOF"; (i) the term "PERSON" shall include natural persons, firms,
partnerships, corporations, governmental authorities or agencies, and any
other public or private legal entities; (j) the term "PROVISIONS," when used
with respect hereto or to any other document or instrument, shall be construed
as if preceded by the phrase "TERMS, COVENANTS, AGREEMENTS, REQUIREMENTS,
AND/OR CONDITIONS"; (k) the term "LEASE" shall mean "TENANCY, SUBTENANCY,
LEASE, SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR" shall mean "LANDLORD,
SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term "TENANTS" or "LESSEE" shall
mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l) the term "OWNED" shall
mean "NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY" and "ALL" shall mean
"ANY OR ALL"; and (n) the term "ON DEMAND" or "UPON DEMAND" shall mean "WITHIN
FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE."
SECTION 9.06 TRANSFER OF LOAN. Lender may, at any time, (i) sell, transfer
or assign the Documents and any servicing rights with respect thereto or (ii)
grant participations therein or issue mortgage pass-through certificates or
other securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any guarantor and any
indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section including the delivery of
an estoppel certificate in accordance with Section 3.16 and such other
documents as may be reasonably requested by Lender.
SECTION 9.07 MISCELLANEOUS. If any provision of the Documents shall be
held to be invalid, illegal, or unenforceable in any respect, this shall not
affect any other provisions of the Documents and such provision shall be
limited and construed as if it were not in the Documents. If title to the
Property becomes vested in any person other than Borrower, Lender may, without
notice to Borrower, deal with such person regarding the Documents or the
Obligations in the same manner as with Borrower without in any way vitiating
or discharging Borrower's liability under the Documents or being deemed to
have consented to the vesting. If both the lessor's and lessee's interest
under any Lease ever becomes vested in any one person, this Instrument and the
security title and security interest created hereby shall not be destroyed or
terminated by the application of the doctrine of merger and Lender shall
continue to have and enjoy all its rights and privileges as to each separate
estate. Upon foreclosure of this Instrument, none of the Leases shall be
destroyed or terminated as a result of such foreclosure, by application of the
doctrine of merger or as a matter of law, unless Lender takes all actions
required by law to terminate the Leases as a result of foreclosure. All of
Borrower's covenants and agreements under the Documents shall run with the
land and time is of the essence. Borrower appoints Lender as its
attorney-in-fact, which appointment is irrevocable and shall be deemed to be
coupled with an interest, with respect to the execution, acknowledgment,
delivery, filing or recording for and in the name of Borrower of any of the
documents listed in Sections 3.04, 3.19, 4.01 and 6.02. The Documents cannot
be amended, terminated, or discharged except in a writing signed by the party
against whom enforcement is sought. No waiver, release, or other forbearance
by Lender will be effective unless it is in a writing signed by Lender and
then only to the extent expressly stated. The provisions of the Documents
shall be binding upon Borrower and its heirs, devisees, representatives,
successors, and assigns including successors in interest to the Property and
inure to the benefit of Lender and its heirs, successors, substitutes, and
assigns. Where two or more persons have executed the Documents, the
obligations of such persons shall be joint and several, except to the extent
the context clearly indicates otherwise. The Documents may be executed in any
number of counterparts with the same effect as if all parties had executed the
same document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be
necessary to produce one such counterpart. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of any
26
<PAGE> 32
Document which is not of public record, and, in the case of any mutilation,
upon surrender and cancellation of the Document, Borrower will issue, in lieu
thereof, a replacement Document, dated the date of the lost, stolen, destroyed
or mutilated Document containing the same provisions.
SECTION 9.08 ENTIRE AGREEMENT. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower
and Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X - LOCAL LAW PROVISIONS
SECTION 10.01 WAIVER. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE
UNDER THE CONSTITUTION OR THE LAWS OF THE STATE OF GEORGIA OR THE CONSTITUTION
OR THE LAWS OF THE UNITED STATES OF AMERICA TO NOTICE, OTHER THAN EXPRESSLY
PROVIDED FOR IN THIS INSTRUMENT, OR TO A JUDICIAL HEARING PRIOR TO THE
EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS INSTRUMENT TO LENDER, AND
BORROWER WAIVES BORROWER'S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE
DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS INSTRUMENT ON THE
GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING. ALL WAIVERS BY BORROWER IN THIS PARAGRAPH HAVE BEEN MADE
VOLUNTARILY, INTELLIGENTLY, AND KNOWINGLY, AFTER BORROWER HAS BY BORROWER'S
ATTORNEY BEEN FIRST APPRISED OF AND COUNSELED WITH RESPECT TO BORROWER'S
POSSIBLE ALTERNATIVE RIGHTS.
/s/ Charles S. Roberts
-----------------------------------------
(Initialed and Acknowledged by Borrower)
SECTION 10.02 NATURE OF INSTRUMENT. THIS INSTRUMENT is a deed passing title
to Lender and is made under the laws of the State of Georgia relating to deeds
to secure debt, and is not a mortgage, and is given to secure the performance
and repayment of the Obligations. All references in this Instrument to
Borrower as "mortgagor" shall be deemed to refer to Borrower as "grantor," and
all references in this Instrument to Lender as "mortgagee" shall be deemed to
refer to Lender as "grantee."
SECTION 10.03 NO NOVATION. Lender's acceptance of an assumption of the
obligations of this Instrument and of the Note, and any release of Borrower
(if any) in connection with such assumption, shall not constitute a novation.
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<PAGE> 33
SECTION 10.04 GEORGIA REMEDIES. Section 6.02(b) above is hereby deleted in
its entirety and the following is substituted in lieu thereof:
"(b) Lender, at its option, may sell the Property, or any part thereof, at
public sale or sales before the door of the courthouse of the county in which
the Property, or any part thereof, is situated, to the highest bidder for
cash, in order to pay the Obligations and insurance premiums, liens,
assessments, taxes and charges, including utility charges, if any, with
accrued interest thereon, and all Costs incurred by Lender in connection with
such sale and all other expenses of the sale and of all proceedings in
connection therewith, including reasonable attorneys' fees, after advertising
the time, place and terms of sale once a week for four (4) weeks immediately
preceding such sale (but without regard to the number of days) in a newspaper
in which sheriff's sales are advertised in said county. The foregoing
notwithstanding, Lender may sell, or cause to be sold, any tangible or
intangible personal property, or any part thereof, and which constitutes a
part of the security hereunder, in the foregoing manner, or as may otherwise
be provided by law. Lender may bid and purchase at any such sale and may
satisfy Lender's obligation to purchase pursuant to Lender's bid by canceling
an equivalent portion of any Obligations then outstanding and secured hereby.
At any such sale, Lender may execute and deliver to the purchaser a
conveyance of the Property, or any part thereof, in fee simple (but without
covenants and warranties, express or implied), and, to this end, Borrower
hereby constitutes and appoints Lender the agent and attorney-in-fact of
Borrower to make such sale and conveyance, and thereby to divest Borrower of
all right, title, and equity that Borrower may have in and to the Property and
to vest the same in the purchaser or purchasers at such sale or sales, and all
the acts and doings of said agent and attorney-in-fact are hereby ratified and
confirmed, and any recitals in said conveyance or conveyances as to facts
essential to a valid sale shall be binding on Borrower. The aforesaid power of
sale and agency hereby granted are coupled with an interest and are
irrevocable by death or otherwise, are granted as cumulative of the other
remedies provided by law for collection of the Obligations secured hereby, and
shall not be exhausted by one exercise thereof but may be exercised until full
payment of all Obligations secured hereby."
IN WITNESS WHEREOF, the undersigned have executed this Instrument
under seal as of the day first set forth above.
<TABLE>
<S> <C>
Signed, sealed, and delivered as to the foregoing BORROWER:
date in the presence of the following witnesses:
ROBERTS PROPERTIES RESIDENTIAL, L.P.,
/S/ Charles R. Elliott a Georgia limited partnership
- ------------------------------------------------
Witness BY: Roberts Realty Investors, Inc., a Georgia
corporation, its sole general partner
/S/ Laurie Heberle By: /S/ Charles S. Roberts
- ------------------------------------------------ ----------------------------------------
Notary Public Charles S. Roberts, President
Commission Expiration Date: 8/19/03 [CORPORATE SEAL]
---------------------
[NOTARY SEAL]
</TABLE>
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EXHIBIT A
(LEGAL DESCRIPTION)
ALL THAT TRACT of land in Land Lots 230 and 235 of the 1st District, 1st
Section, Fulton County, Georgia, described as follows:
To find the true point of beginning, commence at the corner common to Land Lots
197, 198, 230 and 231 of the 1st District, 1st Section, Fulton County,
Georgia; running thence along the land lot line common to said Land Lots 230
and 231 South 88 degrees 50 minutes 38 seconds East 771.67 feet to a property
corner found; thence South 51 degrees 09 minutes 57 seconds West 296.24 feet to
the TRUE POINT OF BEGINNING; from the TRUE POINT OF BEGINNING as thus
established, running thence South 65 degrees 22 minutes 41 seconds East 207.50
feet to a point; thence North 75 degrees 00 minutes 00 seconds East 190.00
feet to a point; thence North 87 degrees 15 minutes 00 seconds East 300.00
feet to a point; thence South 73 degrees 51 minutes 50 seconds East 173.42
feet to a property corner found; thence South 05 degrees 27 minutes 32 seconds
East 537.95 feet to a property corner found; thence South 69 degrees 52 minutes
35 seconds West 767.26 feet to a property corner found; thence South 69 degrees
38 minutes 04 seconds West 202.76 feet to a point on the northeast
right-of-way line of Abbotts Bridge Road (also known as State Route 120);
running thence along the northeast right-of-way line of Abbotts Bridge Road
(also known as State Route 120) the following courses and distances: (1) North
33 degrees 27 minutes 01 seconds West 459.30 feet to a point, and (2) along
the arc of a curve to the left (which arc is subtended by a chord having a
bearing and distance of North 40 degrees 56 minutes 58 seconds West 262.88
feet and a radius of 1,120.91 feet) 263.49 feet to a point; thence, leaving
said right-of-way line, North 51 degrees 09 minutes 57 seconds East 573.06
feet to the TRUE POINT OF BEGINNING, said tract containing approximately 19.23
acres as shown on Plat of Survey for Roberts Properties Residential, L.P.,
Fidelity National Title Insurance Company and The Prudential Insurance Company
of America by Jordan Jones & Goulding, bearing the seal and certification of
Charles H. Jackson, Georgia Registered Professional Land Surveyor No. 2351,
dated September 23, 1999, last revised October 19, 1999.
TOGETHER WITH a non-exclusive right, title and interest in and to the
easements appurtenant to the above-described tract created in that certain
Declaration of Easements by Roberts Properties Residential, L.P. dated October
19, 1999, filed for record October 21, 1999, and recorded in Deed Book 27850,
page 040, Fulton County, Georgia.
<PAGE> 35
EXHIBIT B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials,
fittings, fixtures, chattels, and tangible personal property, and all
appurtenances and additions thereto and betterments, renewals, substitutions,
and replacements thereof, owned by Borrower, wherever situate, and now or
hereafter located on, attached to, contained in, or used or usable in
connection with the real property described in Exhibit A attached hereto and
incorporated herein (the "LAND"), and all improvements located thereon (the
"IMPROVEMENTS") or placed on any part thereof, though not attached thereto,
including all screens, awnings, shades, blinds, curtains, draperies, carpets,
rugs, furniture and furnishings, heating, electrical, lighting, plumbing,
ventilating, air-conditioning, refrigerating, incinerating and/or compacting
plants, systems, fixtures and equipment, elevators, hoists, stoves, ranges,
vacuum and other cleaning systems, call systems, sprinkler systems and other
fire prevention and extinguishing apparatus and materials, motors, machinery,
pipes, ducts, conduits, dynamos, engines, compressors, generators, boilers,
stokers, furnaces, pumps, tanks, appliances, equipment, fittings, and
fixtures.
2. All funds, accounts, deposits, instruments, documents,
contract rights, general intangibles, notes, and chattel paper arising from or
by virtue of any transaction related to the Land, the Improvements, or any of
the personal property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other
rights and privileges now held or hereafter acquired by Borrower in connection
with the Land, the Improvements, or any of the personal property described in
this Exhibit B.
4. All right, title, and interest of Borrower in and to the name
and style by which the Land and/or the Improvements is known, including
trademarks and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under
all plans, specifications, maps, surveys, reports, permits, licenses,
architectural, engineering and construction contracts, books of account,
insurance policies, and other documents of whatever kind or character,
relating to the use, construction upon, occupancy, leasing, sale, or operation
of the Land and/or the Improvements.
6. All interests, estates, or other claims or demands, in law
and in equity, which Borrower now has or may hereafter acquire in the Land,
the Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to
all options to purchase or lease the Land, the Improvements, or any other
personal property described in this Exhibit B, or any portion thereof or
interest therein, and in and to any greater estate in the Land, the
Improvements, or any of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or
demand, both in law and in equity, including claims or demands with respect to
the proceeds of insurance relating thereto, which Borrower now has or may
hereafter acquire in the Land, the Improvements, or any of the personal
property described in this Exhibit B, or any portion thereof or interest
therein, and any and all awards made for the taking by eminent domain, or by
any proceeding or purchase in lieu thereof, of the whole or any part of such
property, including without limitation, any award resulting from a change of
any streets (whether as to grade, access, or otherwise) and any award for
severance damages.
9. All right, title, and interest of Borrower in and to all
contracts, permits, certificates, licenses, approvals, utility deposits,
utility capacity, and utility rights issued, granted, agreed upon, or
otherwise provided by any governmental or private authority, person or entity
relating to the ownership, development, construction, operation, maintenance,
marketing, sale, or use of the Land and/or the Improvements, including all of
the Borrower's rights and privileges hereto or hereafter otherwise arising in
connection with or pertaining to the Land
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and/or the Improvements, including, without limiting the generality of the
foregoing, all water and/or sewer capacity, all water, sewer and/or other
utility deposits or prepaid fees, and/or all water and/or sewer and/or other
utility tap rights or other utility rights, any right or privilege of Borrower
under any loan commitment, lease, contract, Declaration of Covenants,
Restrictions and Easements or like instrument, Developer's Agreement, or other
agreement with any third party pertaining to the ownership, development,
construction, operation, maintenance, marketing, sale, or use of the Land
and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY
DESCRIBED IN EXHIBIT A.
2
<PAGE> 37
EXHIBIT C
Addison Place Townhomes Phase I
(Permitted Exceptions)
1. Taxes and assessments for the year 1999 and subsequent years.
2. The following matters shown on Plat of Survey for Roberts Properties
Residential, L.P., Fidelity National Title Insurance Company and The
Prudential Insurance Company of America by Jordan Jones & Goulding,
bearing the seal and certification of Charles H. Jackson, Georgia
Registered Professional Land Surveyor No. 2351, dated September 23,
1999, last revised October 19, 1999:
(a) 50-foot front building line along the southwesterly boundary
line of subject property;
(b) 20-foot landscape buffer along the southwesterly boundary
line of subject property;
(c) 10-foot landscape strip along the northwesterly boundary line
of subject property
(d) 20-foot side yard setback line along the northwesterly
boundary line of subject property;
(e) 60-foot side yard setback line along the southeasterly and
easterly boundary lines of subject property;
(f) 50-foot landscape buffer along the southeasterly and easterly
boundary lines subject property;
(g) 20-foot building setback lines running along interior drives;
(h) wooden fence located along the southeasterly and easterly
boundary lines of subject property;
(i) barbed wire fence located along the southeasterly boundary
line of subject property;
(j) Fulton County sanitary sewer manhole located in the easterly
boundary line of subject property;
(k) creek running through the northeasterly portion of subject
property;
(1) retention pond located in the northern portion of subject
property;
(m) drainage facilities located throughout the subject property.
3. Rights of upper and lower riparian owners in and to the waters of
lakes, rivers, creeks or branches crossing or adjoining the subject
property, and the natural flow thereof, free from diminution or
pollution.
4. Right-of-Way Easement from R.C. Vaughan to Sawnee Electric Membership
Corporation, dated March 15, 1963, filed for record March 26, 1963,
and recorded in Deed Book 4032, page 244, aforesaid records.
<PAGE> 38
5. Right-of-Way Easement from Wallace T. Hale to Sawnee Electric
Membership Corporation, dated September 11, 1974, filed for record
October 31, 1974, and recorded in Deed Book 6164, page 173, aforesaid
records.
6. Right-of-Way Easement from Benton A. Wood to Sawnee Electric
Membership Corporation, dated June 4, 1964, filed for record June 26,
1964, and recorded in Deed Book 4256, page 561, aforesaid records.
7. Right-of-Way Easement from Jeffrey R. Novak and Stacy G. Novak to
Sawnee Electric Membership Corporation, dated August 23, 1983, filed
for record September 26, 1983, and recorded in Deed Book 8661, page
201, aforesaid records.
NOTE: Sawnee Electric Membership Corporation does retain all rights
associated with and stated in the easements set forth as Exceptions 4
through 7 hereof. Sawnee Electric Membership Corporation reserves the
right to take whatever action it deems necessary within the existing
easement corridor (thirty feet in width). Sawnee Electric Membership
Corporation recognizes that said easements relate only to the
existing corridors and thus will obtain written permission from the
current property owner prior to action occurring outside said
existing corridor.
NOTE: A containment letter has been obtained from Sawnee Electric
Membership Corporation stating that Sawnee Electric Membership
Corporation claims no further interest in the Easements described in
Exceptions 4 through 7 hereof except the right to operate, maintain,
rebuild and renew its existing facilities within its presently
maintained rights of way.
8. Flood Plain Indemnification from Roberts Properties Residential, L.P.
in favor of Fulton County, dated August 18, 1998, recorded in Deed
Book 24983, page 330, aforesaid records.
9. Easement contained in that certain Right-of-Way Deed from Roberts
Properties Residential, L.P. to Fulton County, dated August 18, 1998,
filed September 21, 1998, recorded in Deed Book 25219, page 141,
aforesaid records.
10. Right-of-Way Easement from Roberts Properties Residential, L.P. to
Sawnee Electric Membership Corporation, dated February 5, 1999,
recorded in Deed Book 26823, page 085, aforesaid records.
NOTE: A containment letter has been obtained from Sawnee Electric
Membership Corporation stating that Sawnee Electric Membership
Corporation claims no further interest in the Easements described in
Exception 14 hereof except the right to operate, maintain, rebuild
and renew its existing facilities within its presently maintained
rights of way.
<PAGE> 39
11. Rights of tenants in possession of individual apartment units under
unrecorded leases, as tenants only.
12. Declaration of Easements by Roberts Properties Residential, L.P.,
dated October 19, 1999, filed for record October 21, 1999, and
recorded in Deed Book 27850, page 040, aforesaid records.
13. All matters which are disclosed on that certain Survey for Roberts
Properties Residential, L.P., Fidelity National Title Insurance
Company and First Union National Bank, prepared by James C. Jones,
Georgia Registered Land Surveyor No. 2298 of Rochester & Associates,
Inc., dated October 5, 1999 (Affects Appurtenant Easement only).
<PAGE> 40
EXHIBIT D
LIST OF MAJOR TENANTS
NONE
1
<PAGE> 1
LIMITED GUARANTY
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
the undersigned, ROBERTS REALTY INVESTORS, INC. (whether one or more,
hereinafter together called "Guarantor" in the singular) absolutely guarantees
and agrees to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter
called "Lender") at the address designated in the Instrument (as hereinafter
defined) for payment thereof or as such address may be changed as provided in
the Instrument, all limited and full recourse indebtedness of ROBERTS
PROPERTIES RESIDENTIAL, L.P., a limited partnership organized under the laws
of the State of Georgia (hereinafter called "Borrower"), under Paragraphs 8
and 9 of that certain Promissory Note, dated October 25, 1999 in the original
principal amount of Nine Million Five Hundred Thousand and 00/100 Dollars
($9,500,000.00), payable to the order of Lender, and all modifications,
renewals and extensions of and substitutions for said Promissory Note (said
Promissory Note and all modifications, renewals and extensions thereof and all
substitutions therefor hereinafter called the "Note"), together with all
interest, attorneys' fees and collection costs provided in the Note (all such
indebtedness is hereinafter called the "Indebtedness"), which Note is secured
by the Deed to Secure Debt and Security Agreement (hereinafter called the
"Instrument") of even date herewith from Borrower to Lender and to pay any and
all costs, attorneys' fees and expenses incurred or expended by Lender in
collecting any of the Indebtedness or in enforcing any right granted
hereunder.
Except as otherwise limited as provided herein, in the event Borrower
fails to pay the Indebtedness, Guarantor shall immediately upon written demand
of Lender promptly and with due diligence pay for the benefit of Lender all of
the Indebtedness.
Guarantor expressly waives presentment for payment, demand, notice of
demand and of dishonor and nonpayment of the Indebtedness, notice of intention
to accelerate the maturity of the Indebtedness or any part thereof, notice of
disposition of collateral, notice of acceleration of the maturity of the
Indebtedness or any part thereof, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party. Lender shall be
under no obligation to notify Guarantor of its acceptance hereof or of any
advances made or credit extended on the faith hereof or the failure of
Borrower to pay any of the Indebtedness as it matures or any default in the
performance of any of the Obligations under the Instrument, or to use
diligence in preserving the liability of any person on the Indebtedness or the
Obligations or in bringing suit to enforce collection of the Indebtedness or
performance of the Obligations. Guarantor waives all defenses given to
sureties or guarantors at law or in equity other than the actual payment of
the Indebtedness and performance of the Obligations and all defenses based
upon questions as to the validity, legality or enforceability of the
Indebtedness and/or the Obligations and agrees that Guarantor shall be
primarily liable hereunder.
Lender, without authorization from or notice to Guarantor and without
impairing, modifying, changing, releasing, limiting or affecting the liability
of Guarantor hereunder, may from time to time at its discretion and with or
without valuable consideration, alter, compromise, accelerate, renew, extend
or change the time or manner for the payment of any or all of the
Indebtedness, increase or reduce the rate of interest thereon, take and
surrender security, exchange security by way of substitution, or in any way it
deems necessary take, accept, withdraw, subordinate, alter, amend, modify or
eliminate security, add or release or discharge endorsers, guarantors or other
obligors, make changes of any sort whatever in the terms of payment of the
Indebtedness, in the Obligations or in the manner of doing business with
Borrower, or settle or compromise with Borrower or any other person or persons
liable on the Indebtedness or the Obligations on such terms as it may see fit,
and may apply all moneys received from the Borrower or others, or from any
security held (whether held under a security instrument or not), in such
manner upon the Indebtedness (whether then due or not) as it may determine
1
<PAGE> 2
to be in its best interest, without in any way being required to marshal
securities or assets or to apply all or any part of such moneys upon any
particular part of the Indebtedness. It is specifically agreed that Lender is
not required to retain, hold, protect, exercise due care with respect thereto,
perfect security interests in or otherwise assure or safeguard any security
for the Indebtedness; no failure by Lender to do any of the foregoing and no
exercise or nonexercise by Lender of any other right or remedy of Lender shall
in any way affect any of Guarantor's obligations hereunder or any security
furnished by Guarantor or give Guarantor any recourse against Lender.
The liability of Guarantor hereunder shall not be modified, changed,
released, limited or impaired in any manner whatsoever on account of any or
all of the following: (a) the incapacity, death, disability, dissolution or
termination of Guarantor, Borrower, Lender or any other person or entity; (b)
the failure by Lender to file or enforce a claim against the estate (either in
administration, bankruptcy or other proceeding) of Borrower or any other
person or entity; (c) recovery from Borrower or any other person or entity
becomes barred by any statute of limitations or is otherwise prevented; (d)
any defenses, set-offs or counterclaims which may be available to Borrower or
any other person or entity; (e) any transfer or transfers of any of the
property covered by the Instrument or any other instrument securing the
payment of the Note; (f) any modifications, extensions, amendments, consents,
releases or waivers with respect to the Note, the Deed to Secure Debt and
Security Agreement, any other instrument now or hereafter securing the payment
of the Note, or this Guaranty; (g) any failure of Lender to give any notice to
Guarantor of any default under the Note, the Deed to Secure Debt and Security
Agreement, any other instrument securing the payment of the Note, or this
Guaranty; (h) Guarantor is or becomes liable for any indebtedness owing by
Borrower to Lender other than under this Guaranty; or (i) any impairment,
modification, change, release or limitation of the liability of, or stay of
actions or lien enforcement proceedings against, Borrower, its property, or
its estate in bankruptcy resulting from the operation of any present or future
provision of the Federal Bankruptcy Code or any other present or future
federal or state insolvency, bankruptcy or similar law (all of the foregoing
hereinafter collectively called "applicable Bankruptcy Law") or from the
decision of any court.
Lender shall not be required to pursue any other remedies before
invoking the benefits of the guaranties contained herein, and specifically it
shall not be required to make demand upon or institute suit or otherwise
pursue or exhaust its remedies against Borrower or any surety other than
Guarantor or to proceed against any security now or hereafter existing for the
payment of any of the Indebtedness. Lender may maintain an action on this
Guaranty without joining Borrower therein and without bringing a separate
action against Borrower.
If for any reason whatsoever (including but not limited to ultra
vires, lack of authority, illegality, force majeure, act of God or
impossibility) the Indebtedness or the Obligations cannot be enforced against
Borrower, such unenforceability shall in no manner affect the liability of
Guarantor hereunder and Guarantor shall be liable hereunder notwithstanding
that Borrower may not be liable for such Indebtedness or such Obligations and
to the same extent as Guarantor would have been liable if such Indebtedness or
Obligations had been enforceable against Borrower.
Guarantor absolutely and unconditionally covenants and agrees that in
the event that Borrower does not or is unable so to pay the Indebtedness or
perform the Obligations for any reason, including, without limitation,
liquidation, dissolution, receivership, conservatorship, insolvency,
bankruptcy, assignment for the benefit of creditors, sale of all or
substantially all assets, reorganization, arrangement, composition, or
readjustment of, or other similar proceedings affecting the status,
composition, identity, existence, assets or obligations of Borrower, or the
disaffirmance or termination of any of the Indebtedness or Obligations in or
as a result of any such proceeding, Guarantor shall pay the Indebtedness and
perform the Obligations and no such occurrence shall in any way affect
Guarantor's obligations hereunder.
2
<PAGE> 3
Should the status of Borrower change, this Guaranty shall continue
and also cover the Indebtedness and Obligations of Borrower under the new
status according to the terms hereof. This Guaranty shall remain in full force
and effect notwithstanding any transfer of the property covered by the
Instrument.
In the event any payment by Borrower to Lender is held to constitute
a preference under any applicable Bankruptcy Law, or if for any other reason
Lender is required to refund such payment or pay the amount thereof to any
other party, such payment by Borrower to Lender shall not constitute a release
of Guarantor from any liability hereunder, but Guarantor agrees to pay such
amount to Lender upon demand and this Guaranty shall continue to be effective
or shall be reinstated, as the case may be, to the extent of any such payment
or payments.
Guarantor agrees that it shall not have (a) the right to the benefit
of, or to direct the application of, any security held by Lender (including
the property covered by the Deed to Secure Debt and Security Agreement and any
other instrument securing the payment of the Note), any right to enforce any
remedy which Lender now has or hereafter may have against Borrower, or any
right to participate in any security now or hereafter held by Lender, or (b)
any defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or other right or remedy of Guarantor against
Borrower or against any security resulting from the exercise or election of
any remedies by Lender (including the exercise of the power of sale under the
Instrument), or any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation, from any cause, of the
liability of Borrower.
The payment by Guarantor of any amount pursuant to this Guaranty
shall not in any way entitle Guarantor to any right, title or interest
(whether by way of subrogation or otherwise) in and to any of the Indebtedness
or any proceeds thereof, or any security therefor, unless and until the full
amount owing to Lender on the Indebtedness has been fully paid, but when the
same has been fully paid Guarantor shall be subrogated as to any payments made
by it to the rights of Lender as against Borrower and/or any endorsers,
sureties or other guarantors.
Notwithstanding any payments made by or for the account of Guarantor
on account of the Indebtedness, Guarantor shall not be subrogated to any
rights of Lender until such time as Lender shall have received payment of the
full amount of all Indebtedness. For the purposes of the preceding sentence
only, the Indebtedness shall not be deemed to have been paid in full by
foreclosure of the Instrument or by acceptance of a deed in lieu thereof, and
Guarantor hereby waives and disclaims any interest which it might have in the
property covered by the Instrument or other collateral security for the
Indebtedness, by subrogation or otherwise, following foreclosure of the
Instrument or Lender's acceptance of a deed in lieu thereof.
Guarantor expressly subordinates its rights to payment of any
indebtedness owing from Borrower to Guarantor, whether now existing or arising
at any time in the future, to the prior right of Lender to receive or require
payment in full of the Indebtedness and until payment in full of the
Indebtedness (and including interest accruing on the Note after any petition
under applicable Bankruptcy Law, which post-petition interest Guarantor agrees
shall remain a claim that is prior and superior to any claim of Guarantor
notwithstanding any contrary practice, custom or ruling in proceedings under
such applicable Bankruptcy Law generally), Guarantor agrees not to accept any
payment or satisfaction of any kind of indebtedness of Borrower to Guarantor
or any security for such indebtedness. If Guarantor should receive any such
payment, satisfaction or security for any indebtedness of Borrower to
Guarantor, Guarantor agrees forthwith to deliver the same to Lender in the
form received, endorsed or assigned as may be appropriate for application on
account of, or as security for, the Indebtedness and until so delivered,
agrees to hold the same in trust for Lender.
3
<PAGE> 4
Under no circumstances shall the aggregate amount paid or agreed to
be paid hereunder exceed the highest lawful rate permitted under applicable
usury law (the "Maximum Rate") and the payment obligations of Guarantor
hereunder are hereby limited accordingly. If under any circumstances, whether
by reason of advancement or acceleration of the unpaid principal balance of
the Note or otherwise, the aggregate amounts paid hereunder shall include
amounts which by law are deemed interest and which could exceed the Maximum
Rate, Guarantor stipulates that payment and collection of such excess amounts
shall have been and will be deemed to have been the result of a mistake on the
part of both Guarantor and Lender, and Lender shall promptly credit such
excess (to the extent only of such interest payments in excess of the Maximum
Rate) against the unpaid principal balance of the Note, and any portion of
such excess payments not capable of being so credited shall be refunded to
Guarantor. The term "applicable law" as used in this paragraph shall mean the
laws of the State of Georgia or the laws of the United States, whichever laws
allow the greater rate of interest, as such laws now exist or may be changed
or amended or come into effect in the future.
Guarantor hereby represents, warrants and covenants to and with
Lender as follows: (a) the making of the Loan by Lender to Borrower is and
will be of direct interest, benefit and advantage to Guarantor; (b) Guarantor
is solvent, is not bankrupt and has no outstanding liens, garnishments,
bankruptcies or court actions which could render Guarantor insolvent or
bankrupt, and there has not been filed by or against Guarantor a petition in
bankruptcy or a petition or answer seeking an assignment for the benefit of
creditors, the appointment of a receiver, trustee, custodian or liquidator
with respect to Guarantor or any substantial portion of Guarantor's property,
reorganization, arrangement, rearrangement, composition, extension,
liquidation or dissolution or similar relief under applicable Bankruptcy Law;
(c) all reports, financial statements and other financial and other data which
have been or may hereafter be furnished by Guarantor to Lender in connection
with this Guaranty are or shall be true and correct in all material respects
and do not and will not omit to state any fact or circumstance necessary to
make the statements contained therein not misleading and do or shall fairly
represent the financial condition of Guarantor as of the dates and the results
of Guarantor's operations for the periods for which the same are furnished,
and no material adverse change has occurred since the dates of such reports,
statements and other data in the financial condition of Guarantor; (d) the
execution, delivery and performance of this Guaranty do not contravene, result
in the breach of or constitute a default under any mortgage, deed of trust,
lease, promissory note, loan agreement or other contract or agreement to which
Guarantor is a party or by which Guarantor or any of its properties may be
bound or affected and do not violate or contravene any law, order, decree,
rule or regulation to which Guarantor is subject; (e) there are no judicial or
administrative actions, suits or proceedings pending or, to the best of
Guarantor's knowledge, threatened against or affecting Guarantor or involving
the validity, enforceability or priority of this Guaranty; and (f) this
Guaranty constitutes the legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms.
Guarantor will deliver to Lender within sixty (60) days after each
Note anniversary date financial statements of Guarantor in scope and detail
satisfactory to Lender. The statements shall be sworn and certified as to
accuracy by Guarantor.
Where two or more persons or entities have executed this Guaranty,
unless the context clearly indicates otherwise, all references herein to
"Guarantor" shall mean the guarantors hereunder or either or any of them. All
of the obligations and liability of said guarantors hereunder shall be joint
and several. Suit may be brought against said guarantors, jointly and
severally, or against any one or more of them, less than all, without
impairing the rights of Lender against the other or others of said guarantors;
and Lender may compound with any one or more of said guarantors for such sums
or sum as it may see fit and/or release such of said guarantors from all
further liability to Lender for such indebtedness without impairing the right
of Lender to demand and collect the balance of such indebtedness from the
other or others of said guarantors not so
4
<PAGE> 5
compounded with or released; but it is agreed among said guarantors
themselves, however, that such compounding and release shall in nowise impair
the rights of said guarantors as among themselves.
Except as otherwise provided herein, the rights of Lender are
cumulative and shall not be exhausted by its exercise of any of its rights
hereunder or otherwise against Guarantor or by any number of successive
actions until and unless all Indebtedness has been paid and each of the
obligations of Guarantor hereunder has been performed.
All property of Guarantor now or hereafter in the possession or
custody of or in transit to Lender for any purpose, including safekeeping,
collection or pledge, for the account of Guarantor, or as to which Guarantor
may have any right or power, shall be held by Lender subject to a lien and
security interest in favor of Lender to secure payment and performance of all
obligations and liabilities of Guarantor to Lender hereunder. Guarantor hereby
transfers and conveys to Lender any and all balances, credits, deposits,
accounts, items and moneys of Guarantor now or hereafter in the possession or
control of or otherwise with Lender. Lender is hereby granted a first lien
upon, and security interest in, all property of Guarantor of every kind or
description now or hereafter in possession or control of Lender for any
purpose, including all dividends and distributions on or other rights in
connection therewith. The balance of every account of Guarantor with, and each
claim of Guarantor against, Lender existing from time to time shall be subject
to a lien and subject to set off against any and all liabilities of Guarantor
to Lender, and Lender may, at any time and from time to time at its option and
without notice, appropriate and apply toward the payment of any of such
liabilities the balance of each such account or claim of Guarantor against
Lender.
Any notice or communication required or permitted hereunder shall be
given in writing, sent by (a) personal delivery, or (b) expedited delivery
service with proof of delivery, or (c) United States mail, postage prepaid,
registered or certified mail, or (d) prepaid telegram, telex or telecopy, sent
to the intended addressee at the address shown below, or to such other address
or to the attention of such other person as hereafter shall be designated in
writing by the applicable party sent in accordance herewith. Any such notice
or communication shall be deemed to have been given and received either at the
time of personal delivery or, in the case of delivery service or mail, as of
the date of first attempted delivery at the address and in the manner provided
herein, or in the case of telegram, telex or telecopy, upon receipt.
This Guaranty shall be deemed to have been made under and shall be
governed by the laws of the State of Georgia in all respects.
This Guaranty may be executed in any number of counterparts with the
same effect as if all parties hereto had signed the same document. All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.
This Guaranty may only be modified, waived, altered or amended by a
written instrument or instruments executed by the party against which
enforcement of said action is asserted. Any alleged modification, waiver,
alteration or amendment which is not so documented shall not be effective as
to any party.
The books and records of Lender showing the accounts between Lender
and Borrower shall be admissible in any action or proceeding hereon as prima
facie evidence of the items set forth herein.
Guarantor waives and renounces any and all homestead or exemption
rights Guarantor may have under the Constitution or the laws of any state as
against this Guarantor, and does transfer, convey and assign to
5
<PAGE> 6
Lender a sufficient amount of such homestead or exemption as may be allowed,
including such homestead or exemption as may be set apart in bankruptcy, to
pay and perform the Indebtedness and Obligations. Guarantor hereby directs any
trustee in bankruptcy having possession of such homestead or exemption to
deliver to Lender a sufficient amount of property or money set apart as exempt
to pay and perform the Indebtedness and Obligations.
The terms, provisions, covenants and conditions hereof shall be
binding upon Guarantor and the heirs, devisees, representatives, successors
and assigns of Guarantor and shall inure to the benefit of Lender and all
transferees, credit participants, successors, assignees and/or endorsees of
Lender. Within this Guaranty, words of any gender shall be held and construed
to include any other gender and words in the singular number shall be held and
construed to include the plural and words in the plural number shall be held
and construed to include the singular, unless the context otherwise requires.
A determination that any provision of this Guaranty is unenforceable or
invalid shall not affect the enforceability or validity of any other provision
and any determination that the application of any provision of this Guaranty
to any person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
EXECUTED this 25th day of October, 1999.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts
---------------------------------------------
Name: Charles S. Roberts
Title: President
Attest: /s/ Charles R. Elliott
-----------------------------------------
Name: Charles R. Elliott
Title: Chief Financial Officer
[CORPORATE SEAL]
The address of Guarantor is:
Roberts Realty Investors, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Attention: President
The address of Lender is:
The Prudential Insurance Company of America
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Regional Counsel
Prudential Loan No. 6 103 461
Roberts Residential:Guaranty
6
<PAGE> 1
Atlanta, Georgia
US $3,000,000.00 October 25, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, ROBERTS PROPERTIES RESIDENTIAL,
L.P., a Georgia limited partnership ("Borrower"), promises to pay to the order
of FIRST UNION NATIONAL BANK, a national banking association, its successors
and assigns (hereinafter, together with all subsequent holders of this Note,
called "Lender"), whose address is Post Office Box 740074, Mail Code 9031,
Atlanta, Georgia 30374, on or before the Maturity Date (hereinafter defined),
the principal sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00), together
with interest on the unpaid principal balance from time to time outstanding at
the "Interest Rate" (hereinafter defined).
ARTICLE I. DEFINED TERMS
For purposes hereof:
1.1 "Business Day" means a day on which commercial banks and foreign
exchange markets settle payments in United States dollars in New York, New York
and London, England.
1.2 "Business Day Convention" means that an adjustment shall be made
for any date that would otherwise fall on a day that is not a Business Day, so
that such date will be the next following Business Day.
1.3 "LIBOR Market Rate Index" means, for any day, the rate for
1-month U.S. dollar deposits as reported by Telerate page 3750 as of 11:00 am,
London time, on such day, or if such day is not a London Business Day, then the
immediately preceding London business day (or if not so reported, then as
determined by Lender from another recognized source or interbank quotation).
In the event that the LIBOR Market Index Rate shall no longer be published or
is no longer available for any reason, then Lender shall designate a comparable
reference rate which shall be deemed to be the LIBOR Market Index Rate
hereunder.
<PAGE> 2
1.4 "Interest Rate" means the rate of interest established pursuant
to Paragraph 2.2 below.
1.5 "Loan" means the loan advanced under this Note and evidenced
hereby and by the other Loan Documents (hereinafter defined).
1.6 "Loan Documents" shall have the meaning given to it in the
Security Deed (hereinafter defined).
1.7 "London Business Day" means any day on which commercial banks are
open for business (including dealings in foreign exchange and foreign currency
deposits) in London, England.
1.8 "Maturity Date" means the 30th day of April, 2000, subject to the
Business Day Convention or such earlier date on which this Note shall become
due by acceleration by Lender, by prepayment notice from Borrower, or
otherwise.
1.9 "Security Deed" means that certain Deed to Secure Debt and
Security Agreement of even date herewith, executed by Borrower and given to
Lender, covering certain real and personal property situated in Fulton County,
Georgia, as more particularly described therein.
ARTICLE II. INTEREST
2.1 Calculation of Interest. Interest based on a 360-day year will be
accrued on the number of days funds are actually outstanding, and shall be
calculated on a daily basis.
2.2 Interest Rate. Interest shall be charged on the outstanding
principal balance from the date hereof until the full amount of principal due
hereunder has been paid at a rate equal to the LIBOR Market Index Rate plus one
and one-half percent (1.5%) per annum, as that rate may change from day to day
in accordance with changes in the LIBOR Market Index Rate. Interest shall be
calculated daily on the basis of the actual number of days elapsed over a 360
day year.
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ARTICLE III. PAYMENT AND PREPAYMENT
3.1 Payment. (a) Interest. Interest will be due and payable monthly
in arrears on the 1st day of each month, commencing on November 1, 1999, and
continuing on the same day of each month thereafter, subject to the Business
Day Convention, provided that the final interest payment date shall be the
Maturity Date.
(b) Principal Payments. The entire remaining outstanding
principal balance and all accrued and unpaid interest shall be due and payable
in full on the Maturity Date.
(c) Billing. Lender will bill Borrower monthly for interest
accruing on this Note.
3 2 Place of Payment. All payments hereunder shall be made to Lender
at Lender's address set forth in the first paragraph on page 1 of this Note, or
at such other address as Lender may from time to time designate in writing to
Borrower. All amounts payable hereunder are payable in lawful money of the
United States of America.
3.3 Application of Payments. All payments on this Note shall, at the
option of Lender, be applied first to the payment of accrued but unpaid
interest, and any remainder shall be applied to reduction of the principal
balance hereof. Lender's books and records shall be presumed correct as to the
sums outstanding hereunder, except in the case of manifest error.
3.4 Costs of Collection. Borrower agrees to pay all costs of
collection hereof when incurred, including reasonable attorneys' fees, whether
or not any legal action shall be instituted to enforce this Note.
3.5 Prepayment. (a) Borrower shall have the right, at its election,
to prepay the outstanding principal balance of this Note, in whole or in part,
at any time without penalty or premium.
(b) If any such prepayment is only a partial payment of the
then outstanding principal balance hereof, such prepayment shall be accompanied
by the payment of all accrued but unpaid
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interest on the portion of the outstanding principal balance of the Note being
so paid through the date the prepayment is made. No partial prepayment shall
affect the obligation of Borrower to make any payment of principal or interest
due hereunder on the date set forth in this Note, until this Note has been paid
in full.
3.6 Receipt of Payments. Payments in federal funds immediately
available in the place designated for payment received by Lender prior to 2:00
p.m. local time at said place of payment shall be credited prior to close of
business, while other payments may, at the option of Lender, not be credited
until immediately available to Lender in federal funds in the place designated
for payment prior to 2:00 p.m. local time at said place of payment on a
Business Day.
ARTICLE IV. DEFAULT AND REMEDIES
4.1 Events of Default. Each of the following events shall constitute
an "Event of Default":
(a) If Borrower shall fail, refuse or neglect to pay, in full,
any installment or portion of the indebtedness evidenced hereby within five (5)
days after the same shall become due and payable, whether at the due date
thereof stipulated herein, or at a date fixed for prepayment, or by
acceleration or otherwise; provided, however, that if such installment or
portion of the indebtedness evidenced hereby becomes due and payable as a
result of Lender's accelerating the maturity of this Note, the five (5) day
grace period for payment set forth in this Paragraph 4.1(a) shall not apply to
the accelerated Maturity Date.
(b) The occurrence of any Event of Default under any other Loan
Document.
(c) If there shall be a default in the payment of any other loan
from Lender to Borrower, whether now or hereafter existing, or such borrower
shall fail to perform any of its obligations in connection therewith.
4.2 Late Payment Fee and Default Rate. (a) Upon the occurrence of an
Event of Default that is a monetary default:
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(a) Borrower shall, without notice or demand from lender, pay a
late payment fee of five percentage points (5%) of the amount of principal
and/or interest due in order to cover the extra expense involved in handling
delinquent payments; and
(b) at Lender's option, the interest rate shall become the
Interest Rate plus five percentage points (5%) per annum, (the "Default Rate")
commencing with and continuing for so long as this Note or any portion hereof
is in default.
(c) Payment of such late payment fee shall be a condition
precedent to the curing of any monetary Event of Default. Acceptance by Lender
of any late payment without an accompanying late payment fee shall not be
deemed a waiver of Lender's right to receive such late payment fee or to
receive a late payment fee for any subsequent payment received more than five
(5) days after its due date. This paragraph shall not be deemed to be a waiver
of Lender's right to accelerate payment of this Note under the terms hereof.
4.3 Acceleration; Other Remedies. Upon the occurrence of an Event of
Default, Lender may, at its option, without further notice or demand, declare
the unpaid principal balance and accrued interest on this Note at once due and
payable, foreclose all security deeds, mortgages and liens securing payment
hereof, pursue any and all other rights, remedies, and recourses available to
Lender, or pursue any combination of the foregoing, all remedies hereunder and
under the Loan Documents being cumulative.
4.4 No Waiver. Failure to exercise any of the foregoing options shall
not constitute a waiver of the right to exercise the same or any other option
at any subsequent time in respect to any other event. The acceptance by Lender
of any payment hereunder that is less than payment in full of all amounts due
and payable at the time of such payment shall not constitute a waiver of the
right to exercise any of the foregoing options at that time or at any
subsequent time or nullify any prior exercise of any such option without the
express written consent of Lender.
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ARTICLE V. MISCELLANEOUS
5.1 Waivers. (a) Except as otherwise specifically provided in the
Loan Documents, Borrower and any endorsers or guarantors hereof jointly and
severally waive presentment and demand for payment, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest or notice of
protest and nonpayment, bringing of suit and diligence in taking any action to
collect any sums owing hereunder or in proceeding against any of the rights and
properties securing payment hereof. Borrower and any endorsers or guarantors
hereof agree that the time for any payments hereunder may be extended from time
to time without notice and consent to the acceptance of further security or the
release of any existing security for this Note, all without in any manner
affecting their liability under or with respect to this Note. No extension of
time for the payment of this Note or any installment hereof shall affect the
liability of Borrower under this Note even though Borrower is not a party to
such agreement.
(b) Borrower hereby waives and renounces, to the extent same
may be waived and renounced, for itself, its legal representatives, successors
and assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now provided or which may
hereafter be provided by the Constitution and the laws of the United States and
of any state, both as to itself and in and to all of its property, real and
personal, against the enforcement and collection of the obligations evidenced
by this Note.
5.2 Homestead. Borrower hereby transfers, assigns and conveys to
Lender a sufficient amount of homestead and exemption which Borrower or
Borrower's family may have under or by virtue of the Constitution and laws of
the United States and of any state. In case of bankruptcy, Borrower authorizes
and directs the trustee to deliver to Lender a sufficient amount of property or
money claims as exempt to pay this Note and Lender is appointed
attorney-in-fact for Borrower to claim any and all homestead exemptions allowed
by law.
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5.3 Loan Documents. This Note is issued pursuant to the Loan
Documents and is secured, inter alia, by the Security Deed. All of the
agreements, conditions, covenants, warranties, representations, provisions and
stipulations made by or imposed upon Borrower under the Loan Documents are
hereby made a part of this Note to the same extent and with the same force and
effect as if they were fully inserted herein, and Borrower covenants and agrees
to keep and perform the same, or cause them to be kept and performed, strictly
in accordance with their terms.
5.4 Loan for Business Purposes. This Note is given for business
purposes and none of the proceeds of the Loan or this Note will be used for
personal, family or household purposes.
5.5 Multiple Parties. If this Note is executed by more than one
party, each such party shall be jointly and severally liable for the
obligations of Borrower under this Note. If the Borrower is a partnership, each
general partner of Borrower shall be jointly and severally liable hereunder,
and each such general partner hereby waives any requirement of law that, upon
an occurrence of an Event of Default hereunder or under any of the Loan
Documents, Lender exhaust any assets of Borrower before proceeding against such
general partner's assets.
5.6 Borrower. The term "Borrower" as used in this Note shall mean and
have reference to, collectively, all parties and each of them directly or
indirectly obligated for the indebtedness evidenced by this Note, whether as
principal maker, endorser, guarantor, or otherwise, together with all parties
who have acquired the property conveyed by the Security Deed or any portion or
portions thereof, together with the respective heirs, administrators, executors,
legal representatives, successors and assigns of each of the foregoing.
5.7 Notice. All notices or other communications required or permitted
to be given pursuant to this Note shall be in writing and shall be considered
properly given if mailed by first-class United States mail, postage prepaid,
registered or certified with return receipt requested, or by delivering same in
person to the intended addressee, or by prepaid telegram, telex or telecopy.
Notice so mailed shall be effective two (2) days after its deposit. Notice
given in any other manner shall be effective only if and when received by the
addressee. For
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purposes of notice, the address and telecopy number of Borrower shall be the
address and telecopy number listed on the final page of this Note, and Lender's
address shall be 999 Peachtree Street, 9th Floor, Atlanta, Georgia 30309 (for
notice delivered by personal delivery or telegram), and P. O. Box 740074, Mail
Code 9031, Atlanta, Georgia 30374 (for notice delivered by registered or
certified mail), and Lender's telecopy number shall be (404) 225-4113;
provided, however, that either party shall have the right to change its address
for notice hereunder to any other location within the continental United States
by the giving of one month's notice to the other party in the manner set forth
hereinabove.
5.8 Governing Law. This Note shall be governed by and construed
according to the laws of the State of Georgia, except that United States
federal law shall govern to the extent that it permits Lender to contract for,
charge or receive a greater amount of interest, and giving effect to all other
United States federal laws applicable to national banks. It is expressly
stipulated and agreed to be the intent of Borrower and Lender at all times to
comply with the applicable law now or hereafter governing the interest payable
on this Note or the Loan. If the applicable law is ever revised, repealed, or
judicially interpreted so as to render usurious any amount called for under
this Note, or under any of the Loan Documents, or contracted for, charged,
taken, reserved or received with respect to the Loan, or if Lender's exercise
of the option herein contained to accelerate the maturity of this Note, or if
any prepayment by Borrower results in Borrower's having paid any interest in
excess of that permitted by applicable law, then it is Borrower's and Lender's
express intent that all excess amounts theretofore collected by Lender be
credited on the principal balance of this Note (or, if the Note has been paid
in full, refunded to Borrower), and the provisions of this Note and the Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced hereby and by the other
Loan Documents shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such
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indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to
time in effect and applicable to the Loan for so long as debt is outstanding
under the Loan.
5.9 Severability. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note.
5.10 Time of the Essence. BORROWER AGREES THAT TIME IS OF THE ESSENCE
IN THE PERFORMANCE OF ALL OBLIGATIONS HEREUNDER.
5.11 CONSENT TO JURISDICTION; WAIVER OF RIGHT TO TRIAL BY JURY.
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON COUNTY, GEORGIA,
AND HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF, ANY
CLAIM, DEMAND, PROCEEDING ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
NOTE, ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER AND LENDER
WITH RESPECT TO THIS NOTE, ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS PARAGRAPH WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO JURISDICTION AND
THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. BORROWER ACKNOWLEDGES AND AGREES THAT
THE WITHIN CONSENT AND WAIVER ARE MATERIAL INDUCEMENTS TO LENDER TO MAKE THE
LOAN.
IN WITNESS WHEREOF, this Note has been duly executed under seal in
Atlanta, Georgia on the date first above written.
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BORROWER
ROBERTS PROPERTIES RESIDENTIAL, L.P.
BY: ROBERTS REALTY INVESTORS, INC., its
sole general partner
By: /s/
-------------------------------------
Its:
---------------------------------
Attest: /s/ Charles R. Elliott
---------------------------------
Title: CFO
-------------------------------
[CORPORATE SEAL]
Borrower's Address:
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Borrower's Telecopy Number:
770-396-0706
Borrower's Tax Identification Number:
58-2122875
This signature page is attached to and is a part of that certain
Promissory Note in the original principal amount of Three Million and No/100
Dollars ($3,000,000.00), from Roberts Properties Residential, L.P., as
"Borrower," to First Union National Bank, as "Lender."
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AFTER RECORDING, RETURN TO:
GREGORY A. RANDALL
HOLT NEY ZATCOFF & WASSERMAN, LLP
100 GALLERIA PARKWAY, SUITE 600
ATLANTA, GEORGIA 30339-5911
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (herein referred to as
the "Deed") made and entered into this 25 day of October, 1999 by and between
ROBERTS PROPERTIES RESIDENTIAL, L.P., a Georgia limited partnership (hereinafter
referred to as "Borrower"), and FIRST UNION NATIONAL BANK, whose address is 999
Peachtree Street, N.E., Ninth Floor, Atlanta, Georgia 30309, Attn: Real Estate
Portfolio Management, Mail Code 9068 (hereinafter referred to as "Lender").
W I T N E S S E T H:
That for and in consideration of the sum of ONE HUNDRED AND NO/100
DOLLARS ($100.00) and other good and valuable considerations, the receipt and
sufficiency whereof are hereby acknowledged, and in order to secure the
indebtedness and other obligations of Borrower hereinafter set forth, Borrower
does hereby grant, bargain, sell, convey, assign, transfer and set over unto
Lender, its successors and assigns, all of the following described land and
interests in land, estates, easements, rights, improvements, personal property,
fixtures, equipment, furniture, furnishings, appliances and appurtenances
(hereinafter collectively referred to as the "Premises"):
(a) All that certain tract or parcel of land more particularly
described in Exhibit "A" attached hereto and by this reference made a
part hereof (hereinafter referred to as the "Land").
(b) All buildings, structures and improvements of every nature
whatsoever now or hereafter situated on the Land, and all of Borrower's
interest in all gas and electric fixtures, radiators, heaters, engines
and machinery, boilers, ranges, elevators and motors,
<PAGE> 2
plumbing and heating fixtures, carpeting and other floor coverings,
fire extinguishers and any other safety equipment required by
governmental regulation or law, washers, dryers, water heaters,
mirrors, mantels, air conditioning apparatus, refrigerating plants,
refrigerators, cooking apparatus and appurtenances, window screens,
awnings and storm sashes, which are or shall be attached to the
Premises and all other furnishings, furniture, fixtures, machinery,
equipment, appliances, vehicles, building supplies and materials, books
and records, chattels, inventory, accounts, farm products, consumer
goods, general intangibles and personal property of every kind and
nature whatsoever now or hereafter owned by Borrower and located in, on
or about, or used or intended to be used with or in connection with the
use, operation or enjoyment of the Premises, including all extensions,
additions, improvements, betterments, after-acquired property,
renewals, replacements and substitutions, or proceeds from a permitted
sale of any of the foregoing, and all the right, title and interest of
Borrower in any such furnishings, furniture, fixtures, machinery,
equipment, appliances, vehicles and personal property subject to or
covered by any prior security agreement, conditional sales contract,
chattel mortgage or similar lien or claim, together with the benefit of
any deposits or payments now or hereafter made by Borrower or on behalf
of Borrower; all tradenames, trademarks, servicemarks, logos, and
goodwill related thereto which in any way now or hereafter belong,
relate or appertain to the Premises or any part thereof or are now or
hereafter acquired by Borrower; and all inventory accounts, chattel
paper, documents, equipment, fixtures, farm products, consumer goods
and general intangibles constituting proceeds acquired with cash
proceeds of any of the property described hereinabove, all of which are
hereby declared and shall be deemed to be fixtures and accessions to
the Land and a part of the Premises as between the par-ties hereto and
all persons claiming by, through or under them, and which shall be
deemed to be a portion of the security for the indebtedness herein
described and to be secured by this Deed. The location of the above
described collateral is also the location of the Land.
(c) All of Borrower's interest in all building materials,
fixtures, building machinery and building equipment delivered on site
to the real estate during the course of, or in connection with,
construction of the buildings and improvements.
(d) All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, waters, water
courses, water rights and powers, minerals, flowers, shrubs, trees,
timber and other emblements now or hereafter located on the Land or
under or above the same or any part or parcel thereof or appurtenant to
the title to the Land, and all estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments and appurtenances,
reversion and reversions, remainder and remainders, whatsoever, in any
way belonging, relating or appertaining to the Premises or any part
thereof, or which hereafter shall in any way belong, relate or
appertain to the Premises or any part thereof
(e) All income, rents, issues, profits, and revenues of the
Premises from time to time accruing (including without limitation all
payments under leases or tenancies, proceeds of insurance, condemnation
payments, tenant security deposits whether held by Borrower or in a
trust account, and escrow funds), and all the estate, right, title,
interest, property,
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<PAGE> 3
possession, claim and demand whatsoever at law, as well as in equity,
of Borrower of, in and to the same.
TOGETHER WITH all and singular the rights, tenements, hereditaments,
members and appurtenances whatsoever, in any way belonging, relating or
appertaining to any of the Premises hereinabove mentioned or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by the Borrower, including but not limited to, all rents,
profits, issues and revenues of the Premises from time to time accruing, whether
under leases or tenancies now existing or hereafter created, reserving only the
right to the Borrower to collect the same for its own account so long as the
Borrower is not in default hereunder.
TO HAVE AND TO HOLD the Premises and all parts, rights, members and
appurtenances thereof, to the use, benefit and behoof of Lender, its successors
and assigns, IN FEE SIMPLE forever; and Borrower covenants that Borrower is
lawfully seized and possessed of the Premises and has good right to convey the
same, that the same are unencumbered except for those matters (hereinafter
referred to as the "Permitted Encumbrances") expressly set forth in Exhibit "B"
attached hereto and incorporated herein, and that Borrower does warrant and will
forever defend the title thereto against the claims of all persons whomsoever,
except as to the Permitted Encumbrances.
This Deed is intended to operate and is to be construed as a deed
passing the title to the Premises to Lender and is made under those provisions
of the existing laws of the State of Georgia relating to deeds to secure debt,
and not as a mortgage, and is given to secure the payment of the following
described indebtedness (hereinafter referred to collectively as the
"Indebtedness"):
(a) The debt evidenced by that certain Promissory Note
(hereinafter referred to as the "Note") dated of even date herewith,
made by Borrower, payable to the order of Lender, in the principal face
amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00), together
with any and all renewals, modifications, consolidations and extensions
of the indebtedness evidenced by the Note with interest on the
outstanding principal at the rates provided for in the Note, with the
final payment being due on April 30, 2000 (hereinafter the "Loan"); and
(b) Any and all additional advances made by Lender to protect or
preserve the Premises or the security interest created hereby in the
Premises, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Borrower's
obligations hereunder or for any other purpose provided herein (whether
or not the original Borrower remains the owner of the Premises at the
time of such advances); and
(c) Any and all other obligations and indebtedness now or
hereafter owing by Borrower to Lender.
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<PAGE> 4
The Note, this Deed, and all documents, instruments, deeds and
agreements now or hereinafter evidencing, securing, guaranteeing or otherwise
relating to the Note, this Deed or the Indebtedness are collectively hereinafter
referred to as the "Loan Documents."
Should the Indebtedness be paid according to the tenor and effect
thereof when the same shall become due and payable, and should Borrower perform
all covenants herein contained in a timely manner, then this Deed shall be
promptly canceled and surrendered.
Borrower hereby further covenants and agrees with Lender as follows:
ARTICLE I
1.01 Payment of Indebtedness. Borrower will pay the Note according to
the tenor thereof and the remainder of the Indebtedness promptly as the same
shall become due.
1.02 Taxes, Liens and Other Charges.
(a) Borrower shall pay, on or before the due date thereof or the
day any fine, penalty, interest or cost may be added thereto or imposed by law
for the non-payment thereof, all taxes, assessments, levies, license fees,
permit fees and all other charges (in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen) of every character
whatsoever (including all penalties and interest thereon) now or hereafter
levied, assessed, confirmed or imposed on, or in respect of, or which may be a
lien upon, the Premises, or any part thereof, or any estate, right or interest
therein, or upon the rents, issues, income or profits thereof, and shall submit
to Lender such evidence of the due and punctual payment of all such taxes,
assessments and other fees and charges as Lender may require.
(b) Borrower shall pay, on or before the due date thereof or the
day any fine, penalty, interest or cost may be added thereto or imposed by law
for the non-payment thereof, all taxes, assessments, charges, expenses, costs
and fees which may now or hereafter be levied upon, or assessed or charged
against, or incurred in connection with the Note, the remainder of the
Indebtedness, this Deed or any other Loan Documents, excluding only state and
federal taxes on the income earned by Lender. Borrower shall submit to Lender
such evidence of the due and punctual payment of all such taxes, assessments,
charges, expenses, costs, and fees as Lender may reasonably require.
(c) Borrower shall pay, on or before the due date thereof, all
premiums on policies of insurance covering, affecting or relating to the
Premises, as required pursuant to Section 1.03. Borrower shall submit to Lender
such evidence of the due and punctual payment of all such premiums as Lender may
reasonably require.
(d) In the event of the passage of any state, federal, municipal
or other governmental law, order, rule or regulation, subsequent to the date
hereof, in any manner changing or modifying the laws now in force governing the
taxation of deeds to secure debt or security agreements or debts secured thereby
or the manner of collecting such taxes so as to adversely
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<PAGE> 5
affect Lender, Borrower will promptly pay any such tax on or before the due date
thereof, or the day any fine, penalty, interest or cost may be added thereto or
imposed by law for the non-payment thereof. If Borrower fails to make such
prompt payment or if, in the opinion of Lender, any such state, federal,
municipal, or other governmental law, order, rule or regulation prohibits
Borrower from making such payment or would penalize Lender if Borrower makes
such payment or if, in the opinion of Lender, the making of such payment might
result in the imposition of interest beyond the maximum amount permitted by
applicable law, then the entire balance of the Indebtedness and all interest
accrued thereon shall, at the option of Lender, become immediately due and
payable.
(e) Borrower will cause all debts and liabilities of any
character, including without limitation all debts and liabilities for labor,
material and equipment and all debts and charges for utilities servicing the
Premises, incurred in the improvement, maintenance, operation and development of
the Premises, to be promptly paid, and will not suffer any mechanic's,
materialman's, laborer's, statutory or other lien, including, but not limited
to, any lien resulting from Borrower's failure to perform under subparagraphs
1.02(a) and (b) above, to be filed of record upon all or any part of the
Premises and not released (by payment, bonding or otherwise) within ten (10)
days after Borrower receives actual notice thereof, unless a shorter period for
the release of any specific lien is provided elsewhere in this Deed.
1.03 Insurance.
(a) The Borrower shall keep any buildings and all improvements,
whether now located on the Land or hereinafter constructed on the Land,
continuously insured against loss or damage by fire and against such other
hazards as may be required.
(b) Borrower shall procure for, deliver to and maintain for the
benefit of Lender during the term of this Deed, original paid up insurance
policies of such insurance companies, in such amounts, in form and substance,
and with such expiration dates as are acceptable to Lender and containing
non-contributory standard mortgagee clauses, their equivalent or a mortgagee
loss payable endorsement in favor of Lender satisfactory in all respects to
Lender, providing the types of insurance covering the Premises and the interest
and liabilities incident to ownership, possession and operation thereof as may
be required.
(c) Borrower shall provide single limit comprehensive general
liability insurance in an amount satisfactory to Lender against claims and
liability for bodily injury or property damage to persons or property occurring
on the Premises.
(d) Lender is hereby authorized and empowered, at its option, to
adjust or compromise any loss under any insurance policies maintained pursuant
to this Section 1.03, and to collect and receive the proceeds from any such
policy or policies. Each insurance company is hereby authorized and directed to
make payment for all such losses directly to Lender, instead of to Borrower or
to Borrower and Lender jointly. In the event any insurance company fails to
disburse directly and solely to Lender but disburses instead either solely to
Borrower or to Borrower and Lender jointly, Borrower agrees immediately to
endorse and transfer such
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<PAGE> 6
proceeds to Lender. Upon the failure of Borrower to endorse and transfer such
proceeds as aforesaid, Lender may execute such endorsements or transfers for and
in the name of Borrower and Borrower hereby irrevocably appoints Lender as
Borrower's agent and attorney-in-fact so to do. After deducting from said
insurance proceeds all of its expenses incurred in the collection and
administration of such sums, including reasonable attorneys' fees actually
incurred, Lender may apply the net proceeds or any part thereof, at its option,
(i) to the payment of the Indebtedness, whether or not due and in whatever order
Lender elects; (ii) to the repair and/or restoration of the Premises or (iii)
for any other purposes or objects for which Lender is entitled to advance funds
under this Deed, all without affecting the security interest created by this
Deed; and any balance of such monies then remaining shall be paid to the party
legally entitled thereto. Lender shall not be held responsible for any failure
to collect any insurance proceeds due under the terms of any policy regardless
of the cause of such failure.
(e) At least thirty (30) days prior to the expiration date of each
policy maintained pursuant to this Section 1.03, a renewal or replacement
thereof satisfactory to Lender shall be delivered to Lender. Borrower shall
deliver to Lender receipts evidencing the payment for all such insurance
policies and renewals or replacements. The delivery of any insurance policies
hereunder shall constitute an assignment of all unearned premiums as further
security hereunder. In the event of the foreclosure of this Deed or any other
transfer of title to the Premises in extinguishment of the Indebtedness, all
right, title and interest of Borrower in and to all insurance policies then in
force shall pass to the purchaser or to Lender, as the case may be, and Lender
is hereby irrevocably appointed by Borrower as attorney-in-fact for Borrower to
assign any such policy to said purchaser or to Lender, as the case may be.
1.04 Monthly Deposits. Upon the occurrence of an Event of Default, at
the option of Lender and upon written notice to Borrower, and further to secure
the payment of the taxes and assessments referred to in Section 1.02 and the
premiums on the insurance referred to in Section 1.03, Borrower shall deposit
with Lender, on the due date of each installment under the Note, such amounts as
in the reasonable estimation of Lender shall be necessary to pay such charges as
they become due; said deposits to be held by Lender, with interest, and free of
any liens or claims on the part of Borrower or creditors of Borrower and as part
of the security of Lender, and to be used by Lender to pay current taxes and
assessments and insurance premiums on the Premises as the same accrue and are
payable. Payment from said sums for said purposes shall be made by Lender at its
discretion and may be made even though such payments will benefit subsequent
owners of the Premises. Said deposits shall not be, nor be deemed to be, trust
funds but may be commingled with the general funds of Lender. If said deposits
are insufficient to pay the taxes and assessments in full as the same become
payable, Borrower, upon written request of Lender, will deposit with Lender such
additional sum or sums as may be required in order for Lender to pay such taxes
and assessments in full. Upon any Event of Default or Potential Default under
this Deed or the Note, or any other Loan Documents, Lender may, at its option,
apply any money in the fund resulting from said deposits to the payment of the
Indebtedness in such manner as it may elect. As used herein, "Potential Default"
shall mean any event, circumstance or occurrence which with the giving of notice
or passage of time, or both, would be an Event of Default hereunder.
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1.05 Condemnation. If all or any portion of the Premises shall be
damaged or taken through condemnation (which term when used in this Deed shall
include any damage or taking by any governmental authority, quasi-governmental
authority, or any party having the power of condemnation and any transfer by
private sale in lieu thereof), either temporarily or permanently, then the
entire Indebtedness shall, at the option of Lender, become immediately due and
payable. Borrower, promptly upon obtaining knowledge of the institution, or the
proposed, contemplated or threatened institution, of any action or proceeding
for the taking through condemnation of the Premises or any part thereof will
notify Lender, and Lender is hereby authorized, at its option, to commence,
appear in and prosecute, through counsel selected by Lender, in its own or in
Borrower's name, any action or proceeding relating to any condemnation, and to
settle or compromise any claim in connection therewith. All such compensation,
awards, damages, claims, rights of action and proceeds and the right thereto are
hereby assigned by Borrower to Lender, and Lender is authorized, at its option,
to collect and receive all such compensation, awards or damages and to give
proper receipts and acquittances, therefor without any obligation to question
the amount of any such compensation, awards or damages. After deducting from
said condemnation proceeds all of its expenses incurred in the collection and
administration of such sums, including attorney's fees, Lender may apply the net
proceeds or any part thereof, at its option, (a) to the payment of the
Indebtedness, whether or not due and in whatever order Lender elects, (b) to the
repair and/or restoration of the Premises and/or (c) for any other purposes or
objects for which Lender is entitled to advance funds under this Deed, all
without affecting the lien of this Deed; and any balance of such monies then
remaining shall be paid to Borrower or any other person or entity lawfully
entitled thereto. Borrower agrees to execute such further assignment of any
compensation, awards, damages, claims, rights of action and proceeds as Lender
may reasonably require. If, prior to the receipt by Lender of such award or
proceeds, the Premises shall have been sold on foreclosure of this Deed, or
under the power of sale herein granted, Lender shall have the right to receive
such award or proceeds to the extent of any unpaid Indebtedness following such
sale, with legal interest thereon, whether or not a deficiency judgment on this
Deed or the Note shall have been sought or recovered, and to the extent of
reasonable counsel fees, costs and disbursements incurred by Lender in
connection with the collection of such award or proceeds.
1.06 Care of Premises.
(a) Borrower will keep the buildings, parking areas, roads and
walkways, common areas, landscaping and all other improvements of any kind now
or hereafter erected on the Land or any part thereof in good condition and
repair, will not commit or suffer any waste and will not do or suffer to be done
anything which will increase the risk of fire or other hazard to the Premises or
any part thereof or which would or could result in the cancellation of any
insurance policy carried with respect to the Premises.
(b) Borrower will not remove, demolish nor alter the design or
structural character of any building, fixture or other improvement now or
hereafter constructed on the Land without the prior written consent of Lender.
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(c) If the Premises or any part thereof is damaged by fire or any
other cause, Borrower will give immediate written notice thereof to Lender.
(d) Lender or its representative is hereby authorized to enter
upon and inspect the Premises at any time during normal business hours, subject
to rights of tenants and upon at least twenty four (24) hours notice to
Borrower.
(e) Borrower will promptly comply with all present and future
laws, ordinances, rules and regulations of any governmental authority affecting
the Premises or any part thereof. If Borrower receives notice from any federal,
state, or other governmental entity that the Premises fail to comply with any
applicable law, ordinance, rule, order or regulation, Borrower will promptly
furnish a copy of such notice to Lender.
(f) Subject to Section 1.03(d) hereof respecting insured losses,
if all or any part of the Premises shall be damaged by fire or other casualty,
Borrower will promptly restore the Premises to the equivalent of its original
condition to the extent practical; and subject to Section 1.05 hereof respecting
condemnation, if a part of the Premises shall be taken through condemnation,
Borrower will promptly restore, repair or alter the remaining portions of the
Premises in a manner reasonably satisfactory to Lender. Borrower shall not be
obligated to so restore, repair or alter unless in each instance Lender agrees
to make available to Borrower (pursuant to procedures satisfactory to Lender)
any net insurance or condemnation proceeds actually received by Lender hereunder
in connection with such casualty loss or condemnation, to the extent such
proceeds are required to defray the expense of such restoration, repair or
alteration; provided, however, the insufficiency of any such insurance or
condemnation proceeds to defray the entire expense of restoration, repair or
alteration shall in no way relieve Borrower of its obligation to restore, repair
or alter.
1.07 Leases, Contracts, Etc.
(a) As additional collateral and further security for the
Indebtedness, Borrower does hereby assign to Lender Borrower's interest in any
and all leases, tenant contracts, rental agreements, franchise agreements,
management contracts, construction contracts, and other contracts, licenses and
permits now or hereafter affecting the Premises, or any part thereof, and
Borrower agrees to execute and deliver to Lender such additional instruments, in
form and substance reasonably satisfactory to Lender, as may hereafter from time
to time be requested by Lender further to evidence and confirm said assignment;
provided, however, that acceptance of any such assignment shall not be construed
as a consent by Lender to any lease, tenant contract, rental agreement,
franchise agreement, management contract, construction contract, or other
contract, license or permit, or to impose upon Lender any obligation with
respect thereto.
(b) Borrower shall not execute any further assignment of the
income, rents, issues or profits, or any part thereof, from the Premises unless
Lender shall first consent in writing to such assignment and unless such
assignment shall expressly provide that it is subordinate to the assignment
contained in this Deed and any assignment executed pursuant hereto or concerning
the Indebtedness.
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(c) Borrower shall furnish to Lender, within ten (10) days after a
written request by Lender to do so, a certified statement setting forth the name
of all lessees and tenants of the Premises, the terms of their respective
leases, tenant contracts or rental agreements, the space occupied, and the
rentals payable thereunder, and stating, to the best knowledge of Borrower,
whether any defaults, off-sets or defenses exist under or in connection with any
of said leases, tenant contracts or rental agreements.
(d) As of the date hereof, there exist no leases, tenant contracts
or rental agreements with respect to the Premises or any portion thereof except
as previously disclosed to Lender.
1.08 Security Agreement.
With respect to the machinery, apparatus, equipment, fittings,
fixtures, building supplies and materials, articles of personal property,
chattels, chattel paper, documents, inventory, accounts, consumer goods and
general intangibles referred to or described in this Deed, or in any way
connected with the use and enjoyment of the Premises, this Deed is hereby made
and declared to be a security agreement, encumbering each and every item of such
property included herein, in compliance with the provisions of the Uniform
Commercial Code as enacted in the State of Georgia. Upon request by Lender, at
any time and from time to time, a financing statement or statements reciting
this Deed to be a security agreement affecting all of such property shall be
executed by Borrower and Lender and appropriately filed. The remedies for any
violation of the covenants, terms and conditions of the security agreement
contained in this Deed shall be (i) as prescribed herein, or (ii) as prescribed
by general law, or (iii) as prescribed by the specific statutory consequences
now or hereafter enacted and specified in said Uniform Commercial Code, all at
Lender's sole election. Borrower and Lender agree that the filing of such
financing statement or statements in the records normally having to do with
personal property shall not in any way affect the agreement of Borrower and
Lender that everything used in connection with the production of income from the
Premises or adapted for use therein or which is described or reflected in this
Deed, is, and at all times and for all purposes and in all proceedings, legal or
equitable, shall be regarded as part of the real estate conveyed hereby
regardless of whether (a) any such item is physically attached to the
improvements, (b) serial numbers are used for the better identification of
certain items capable of being thus identified in an exhibit to this Deed, or
(c) any such item is referred to or reflected in any such financing statement or
statements so filed at any time. Similarly, the mention in any such financing
statement or statements of the rights in and to (aa) the proceeds of any fire
and/or hazard insurance policy, or (bb) any award in eminent domain proceedings
for a taking or for loss of value, or (cc) Borrower's interest as lessor in any
present or future lease or rights to income growing out of the use and/or
occupancy of the Premises, whether pursuant to lease or otherwise, shall not in
any way alter any of the rights of Lender as determined by this Deed or affect
the priority of Lender's security interest granted hereby or by any other
recorded document, it being understood and agreed that such mention in such
financing statement or statements is solely for the protection of Lender in the
event any court shall at any time hold with respect to the foregoing clauses
(aa), (bb) or (cc) of this sentence, that notice of Lender's priority of
interest to be effective against a particular class of persons, must be filed in
the Uniform Commercial Code records.
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1.09 Further Assurances; After Acquired Property. At any time, and
from time to time, upon request by Lender, Borrower will make, execute and
deliver or cause to be made, executed and delivered, to Lender and, where
appropriate, cause to be recorded and/or filed and from time to time thereafter
to be re-recorded and/or refiled at such time and in such offices and places as
shall be deemed necessary by Lender, any and all such other and further deeds to
secure debt, mortgages, deeds of trust, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates, and other documents as to the Premises as may, in the opinion of
Lender, be reasonably necessary in order to effectuate, complete or perfect, or
to continue and preserve (i) the obligations of Borrower under the Note, this
Deed and the other Loan Documents and (ii) the security interest created by this
Deed as a first and prior security interest upon and security title in and to
all of the Premises, whether now owned or hereafter acquired by Borrower. The
security title of this Deed and the security interest created hereby will
automatically attach, without further act, to all after acquired property as
described herein attached to and/or used in the operation of the Premises or any
part thereof.
1.10 Expenses. Borrower will pay or reimburse Lender, upon demand
therefore, for all reasonable attorney's fees actually incurred, costs and
expenses incurred by Lender in any suit, action, legal proceeding or dispute of
any kind in which Lender is made a party or appears as party plaintiff or
defendant, affecting the Indebtedness, this Deed or the interest created herein,
or the Premises, including, but not limited to, the exercise of the power of
sale contained in this Deed, any condemnation action involving the Premises or
any action to protect the security hereof; and any such amounts paid by Lender
shall be added to the Indebtedness and shall be secured by this Deed.
Notwithstanding the foregoing, in any litigation involving a dispute between
Lender and Borrower, Lender shall not be entitled to recover its reasonable
attorneys' fees, costs and expenses if Borrower is the prevailing party in such
litigation.
1.11 Estoppel Affidavits. Borrower, upon ten (10) days prior written
notice, shall furnish Lender a written statement, duly acknowledged, setting
forth the unpaid principal of, and interest on, the Indebtedness secured hereby
and whether or not any offsets or defenses exist against the Indebtedness, or
any portion thereof, and, if such offsets or defenses exist, stating in
reasonable detail the specific facts relating to each such offset or defense.
1.12 Subrogation. To the full extent of the Indebtedness, Lender is
hereby subrogated to the liens, claims and demands, and to the rights of the
owners and holders of each and every claim, demand and other encumbrance on the
Premises which is paid or satisfied, in whole or in part, out of the proceeds of
the Indebtedness, and the respective liens, claims, demands and other
encumbrances shall be, and each of them is hereby, preserved and shall pass to
and be held by Lender as additional collateral and further security for the
Indebtedness, to the same extent they would have been preserved and would have
been passed to and held by Lender, had they been duly and legally assigned,
transferred, set over and delivered unto Lender by assignment, notwithstanding
the fact that any instrument providing public notice of the same may be
satisfied and canceled of record.
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1.13 Books, Records, Accounts and Annual Reports. Borrower shall keep
and maintain or shall cause to be kept and maintained, at Borrower's cost and
expense, proper and accurate books, records and accounts reflecting all items of
income and expense of Borrower in connection with the Premises as may be
required. Upon the occurrence of an Event of Default and upon three (3) days
advance notice, Lender, by Lender's agents, accountants and attorneys, shall
have the right from time to time to examine such books, records and accounts at
the office of Borrower or such other person or entity maintaining such books,
records and accounts and to make copies or extracts thereof as Lender shall
desire and to discuss Borrower's affairs, finances and accounts with Borrower
and with the officers and principals of Borrower, at such reasonable times as
may be requested by Lender. Borrower shall provide Lender with current financial
information as may be reasonably requested by Lender from time to time.
1.14 Limit of Validity. If from any circumstances whatsoever
fulfillment of any provision of this Deed or of the Note, at the time
performance of such provision shall be due, shall involve transcending the
limits of validity presently prescribed by any applicable usury statute or any
other applicable law, with regard to obligations of like character and amount,
then ipso facto the obligation to be fulfilled shall be reduced to the limit of
such validity, so that in no event shall any exaction be possible under this
Deed or under the Note that is in excess of the current limit of such validity,
but such obligation shall be fulfilled to the limit of such validity. The
provisions of this Section 1.14 shall control every other provision of this
Deed and of the Note.
1.15 Intentionally left blank.
1.16 Conveyance of Premises. Borrower hereby acknowledges to Lender
that (i) the identity and expertise of Borrower were and continue to be material
circumstances upon which Lender has relied in connection with, and which
constitute valuable consideration to Lender for, the extending to Borrower of
the indebtedness evidenced by the Note and (ii) any change in such identity or
expertise could materially impair or jeopardize the security for the payment of
the Note granted to Lender by this Deed. Borrower therefore covenants and agrees
with Lender, as part of the consideration for the extending to Borrower of the
indebtedness evidenced by the Note, that Borrower shall not further encumber,
pledge, convey, transfer, assign or sell any or all of its interest in the
Premises without the prior written consent of Lender.
1.17 Use of Premises. Borrower shall not be permitted to alter or
change the present use of the Premises or to abandon the Premises without the
prior written consent of Lender.
1.18 Acquisition of Collateral. Borrower shall not acquire any portion
of the personal property covered by this Deed subject to any security interest,
conditional sales contract, title retention arrangement or other charge or lien
taking precedence over the security title and lien of this Deed.
1.19 Change of Ownership. Except as expressly permitted in this Deed,
the underlying ownership in Borrower shall not be changed without the prior
written consent of Lender. If Borrower or any general partner of Borrower is a
corporation, for purposes of this Section 1.19 a
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change in ownership shall be deemed to occur upon any dissolution, merger,
consolidation, or sale of the controlling percentage of the capital stock of
Borrower, or the sale of more than twenty percent (20%) of the value of the
assets of Borrower other than in the ordinary course of business. The phrase
"controlling percentage" shall mean the ownership of, and the right to vote,
stock possessing more than fifty percent (50%) of the total combined voting
power of all classes of Borrower's capital stock issued, outstanding, and
entitled to vote for the election of directors. If Borrower is a general
partnership, joint venture or limited partnership, for purposes of this Section
1. 19, a change in ownership shall be deemed to occur upon a withdrawal,
substitution or addition of any partner or joint venturer owning twenty percent
(20 %) or more of the equity interest in the partnership, joint venture or
limited partnership, or upon the dissolution or liquidation of the partnership,
joint venture, or limited partnership.
1.20 Rules, Regulations. Borrower hereby represents and warrants: (i)
that Borrower shall comply with all laws, ordinances, rules, regulations,
covenants, conditions, and restrictions affecting the Premises and shall not
commit or permit any act upon or concerning the Premises in violation of any
such laws, ordinances, rules, regulations, covenants, conditions, and
restrictions; and (ii) that, to the best of Borrower's actual knowledge, the
location, construction, occupancy, operation and actual or intended use of the
Premises do not violate any applicable law, ordinance, rule, regulation,
covenant, condition or restriction affecting the Premises. Borrower agrees to
indemnify and hold Lender harmless from and against and shall reimburse Lender
for, any and all claims, demands, causes of action, losses, damages,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and court costs) arising out of or in connection with the breach
of any representation or warranty of Borrower set forth in this Section 1.20 and
the failure of Borrower to perform any obligation herein required to be
performed by Borrower.
1.21 Hazardous Waste and Substances: Environmental Indemnity. Borrower
shall comply with all laws, governmental standards and regulations applicable to
Borrower and/or to the Premises in connection with occupational health and
safety, Hazardous Substances (as hereinafter defined), and environmental
matters. Borrower shall promptly notify Lender of its receipt of any notice of a
violation of any such law, standard or regulation. The use, generation, storage,
release, threatened release, discharge, disposal or presence on, under or about
the Premises of any Hazardous Substances by Borrower, Borrower's agents, or any
tenant or sublessee occupying part or all of the Premises (unless permitted and
in accordance with all applicable laws) which is not cured within fifteen (15)
days following written notice to Borrower shall be an Event of Default under
this Deed. "Hazardous Substances" shall mean any toxic or hazardous waste or
substances, including, without limitation, petroleum, including crude oil or any
fraction thereof, flammable explosives, radioactive materials, asbestos, any
material containing polychlorinated biphenyls, and any of the substances defined
as "hazardous substances" or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq., Hazardous Materials Transportation Act, 49 U. S.
C. ss. 1802, the Resource Conservation and Recovery Act, 42
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U. S. C. ss. 6901 et seq., and in the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. ss. 2601 et seq., or in any other federal, state, local or
other governmental legislation, statute, law, code, rule, regulation or
ordinance identified by its terms as pertaining to the disposal of hazardous
substances or waste.
ARTICLE II
2.01 Defaults. The terms "Event of Default" or "Events of Defaults",
wherever used in this Deed, shall mean any one or more of the following events:
(a) If Borrower shall fail, refuse or neglect to pay, in full, any
installment or portion of the Indebtedness within five (5) days after the same
shall become due and payable, whether at the due date thereof stipulated in the
Loan Documents, or at a date fixed for prepayment, or by acceleration or
otherwise; provided, however, that if such installment or portion of the
Indebtedness becomes due and payable as a result of Lender's accelerating the
maturity of the Indebtedness in accordance with the Loan Documents, the five (5)
day grace period for payment set forth in this Paragraph 5.1 shall not apply to
the accelerated due date.
(b) Failure by Borrower to duly and timely observe or perform any
other term, covenant, condition or agreement in this Deed; or
(c) The occurrence of a default or event of default on the part of
Borrower under any of the other Loan Documents after expiration of any
applicable grace periods provided therein, if any; or
(d) Except for the breach of any warranty of title, which breach
shall be governed by paragraph 2. 01(j) below, any warranty or representation of
Borrower contained in this Deed or in any of the other Loan Documents proves to
be untrue or misleading in any material respect; or
(e) The filing by Borrower, or any endorser or guarantor of the
Note (any such endorser or guarantor of the Note, being hereinafter referred to
as an "Affiliate") of a voluntary petition in bankruptcy or the filing by
Borrower or any Affiliate of any petition or answer seeking or acquiescing in
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors, or Borrower's or any Affiliate's seeking or consenting
to or acquiescing in the appointment of any trustee, receiver or liquidator of
Borrower or such Affiliate to take possession of all or any substantial part of
the Premises or of any other property or assets of Borrower or such Affiliate,
or of any or all of the income, rents, issues, earnings, profits or revenues
thereof, or the making by Borrower or any Affiliate of any general assignment
for the benefit of creditors, or the admission in writing by Borrower or any
Affiliate of its inability to pay its debts generally as they become due or the
commission by Borrower or any Affiliate of an act of bankruptcy; or
(f) The filing of a petition against Borrower or any Affiliate
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief
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under any present or future federal, state or other law or regulation relating
to bankruptcy, insolvency or other relief for debtors, or the appointment of any
trustee, receiver or liquidator of Borrower or any Affiliate or of all or any
substantial part of the Premises or of any or all of the income, rents, issues,
profits or revenues thereof unless such petition shall be dismissed within sixty
(60) days after such filing, but in any event prior to the entry of an order,
judgment or decree approving such petition; or
(g) The Premises or any part thereof are subjected to actual or
threatened waste, or any material part thereof is removed, demolished or altered
(except for replaceable personal property which is promptly replaced and except
for any casualty or condemnation) without the prior written consent of Lender;
or
(h) (1) Borrower or any Affiliate (if a corporation) is liquidated
or dissolved or its charter expires or is revoked, or (2) Borrower or any
Affiliate (if a partnership or business association) is dissolved or
partitioned, or (3) Borrower or any Affiliate (if a trust) is terminated or
expires; or
(i) The filing of any federal tax lien against Borrower or any
Affiliate unless such lien is satisfied or bonded within forty-five (45) days
after its filing; or
(j) Any lien or other encumbrance is filed against the Premises or against
the Borrower which according to law is superior to the lien or encumbrance
created by this Deed (except for a lien for real property taxes which are not
yet due and payable), or any claim of priority to this Deed by title, lien or
otherwise is asserted in any legal or equitable proceeding, and Borrower does
not provide Lender, within five (5) days of Borrower's actual notice of such
lien or claim, with reasonably satisfactory assurance from the insurance company
providing title insurance to Lender for the Premises that Lender has title
insurance coverage over such superior lien or claim, or Borrower does not
remove, satisfy or bond such lien or claim within thirty (30) days of Borrower's
actual notice thereof.
2.02 Acceleration of Maturity.
If an Event of Default shall have occurred then the entire Indebtedness
shall, at the option of Lender, immediately become due and payable without
notice, except as specifically provided herein, in the Note, and in the Loan
Documents, time being of the essence of this Deed; and no omission on the part
of Lender to exercise such option when entitled to do so shall be construed as a
waiver of such right.
2.03 Right to Enter and Take Possession.
(a) If an Event of Default shall have occurred and be continuing,
Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual
possession of the Premises and if, and to the extent, permitted by law, Lender
itself, or by such officers or agents as it may appoint, may enter and take
possession of all the Premises without the appointment of a receiver, or an
application therefor, and may exclude Borrower and its agents and employees
wholly therefrom,
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and may have joint access with Borrower to the books, papers and accounts of
Borrower relating to the Premises.
(b) Subject to the terms and conditions of Section 2.03(a) herein, if
Borrower shall for any reason fail to surrender or deliver the Premises or any
part thereof after such demand by Lender, Lender may obtain a judgment or decree
conferring upon Lender the right to immediate possession or requiring Borrower
to deliver immediate possession of the Premises to Lender, and Borrower hereby
specifically covenants and agrees that Borrower will not oppose, contest or
otherwise hinder or delay Lender in any action or proceeding by Lender to obtain
such judgment or decree. Borrower will pay to Lender, upon demand, all expenses
of obtaining such judgment or decree, including reasonable compensation to
Lender's attorneys and agents; and all such expenses and compensation shall,
until paid, become part of the Indebtedness and shall be secured by this Deed.
(c) Subject to the terms and conditions of Section 2.03(a) herein,
upon every such entering upon or taking of possession, Lender may hold, store,
use, operate, manage and control and maintain the Premises and conduct the
business thereof, and, from time to time (i) make all necessary and proper
maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property; (ii) insure or keep the Premises
insured; (iii) manage and operate the Premises and exercise all the rights and
power of Borrower to the same extent as Borrower could in its own name or
otherwise with respect to the same; and (iv) enter into any and all agreements
with respect to the exercise by others of any of the powers herein granted
Lender, all as Lender from time to time may determine to be in its best
interest. Lender may collect and receive all the income, rents, issues, profits
and revenues from the Premises, including those past due as well as those
accruing thereafter, and Lender may apply any money and proceeds received by
Lender, in whatever order or priority Lender in its sole discretion may
determine, to the payment of (i) all expenses of taking, holding, managing and
operating the Premises (including reasonable compensation for the services of
all persons employed for such purposes); (ii) the cost of all such maintenance,
repairs, renewals, replacements, additions, betterments, improvements, purchases
and acquisitions; (iii) the cost of such insurance; (iv) such taxes, assessments
and other similar charges as Lender may at its option pay; (v) other proper
charges upon the Premises or any part thereof; (vi) the reasonable compensation,
expenses and disbursements of the attorneys and agents of Lender; (vii) accrued
interest; (viii) deposits required in Section 1.04 and other sums required to be
paid under this Deed; and (ix) overdue installments of principal. Anything in
this Section 2.03 to the contrary notwithstanding, Lender shall not be obligated
to discharge or perform the duties of a landlord to any tenant or incur any
liability as the result of any exercise by Lender of its rights under this Deed,
nor shall Lender be responsible or liable for any waste committed on the
Premises by any tenant or other person or for any dangerous or defective
condition of the Premises, or for any negligence in the management, upkeep,
repair or control of the Premises resulting in any loss, injury or death to any
tenant, licensee, employee, or stranger, and Lender shall be liable to account
only for the rents, incomes, issues, profits and revenues actually received by
Lender.
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(d) For the purpose of carrying out the provisions of this Section
2.03, the Borrower hereby constitutes and appoints the Lender the true and
lawful attorney in fact of the Borrower to do and perform, from time to time,
any and an actions necessary and incidental to such purpose and does, by these
presents, ratify and confirm any and all actions of said attorney in fact.
(e) In the event that all such interest, deposits and principal
installments and other sums due under any of the terms, covenants, conditions
and agreements of this Deed shall be paid and all Events of Defaults shall be
cured, and as a result thereof Lender surrenders possession of the Premises to
Borrower, the same right of taking possession shall continue to exist if any
subsequent Event of Default shall occur.
2.04 Performance by Lender. If Borrower shall default in the payment,
performance or observance of any term, covenant or condition of this Deed and
after the expiration of any applicable notice and cure period, if any, Lender
may, at its option, pay, perform or observe the same, and all payments made or
costs or expenses incurred by Lender in connection therewith shall be secured
hereby and shall be, upon demand, immediately repaid by Borrower to Lender with
interest thereon at the default rate provided in the Note. Lender shall be the
sole judge of the necessity for any such actions and of the amounts to be paid.
Lender is hereby empowered to enter and to authorize others to enter upon the
Premises or any part thereof for the purpose of performing or observing any such
defaulted term, covenant or condition without thereby becoming liable to
Borrower or any person in possession holding under Borrower.
2.05 Receiver. If an Event of Default shall have occurred and be
continuing, Lender, upon application to a court of competent jurisdiction, shall
be entitled as a matter of strict right without notice and without regard to the
adequacy or value of any security for the Indebtedness secured hereby or the
solvency of any party bound for its payment, to the appointment of a receiver to
take possession of and to operate the Premises and to collect and apply the
rents, issues, profits and revenues thereof. The receiver shall have all the
rights and powers permitted under the laws of the State of Georgia. Borrower
will pay to Lender upon demand all expenses, including receiver's fees,
attorney's fees, costs and agent's compensation, incurred pursuant to the
provisions of this Section 2.05; and any such amounts paid by Lender shall be
added to the Indebtedness and shall be secured by this Deed.
2.06 Enforcement.
(a) When the Indebtedness shall become due, whether by
acceleration or at maturity and Borrower fails to pay the Indebtedness in full
at maturity, Lender, at its option, may sell the Premises or any part of the
Premises at public sale or sales before the door of the courthouse of the county
in which the Premises or any part of the Premises is situated, to the highest
bidder for cash, in order to pay the Indebtedness and all expenses of the sale
and of all proceedings in connection therewith, including reasonable attorney's
fees, if incurred, after advertising the time, place and terms of sale once a
week for four (4) weeks immediately preceding such sale (but without regard to
the number of days) in a newspaper in which Sheriff's sales are advertised in
said county. At any such public sale, Lender may execute and deliver to the
purchaser a conveyance of the Premises or any part of the Premises in fee
simple, with full warranties of title,
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and to this end, Borrower hereby constitutes and appoints Lender the agent and
attorney-in-fact of Borrower to make such sale and conveyance, and thereby to
divest Borrower of all right, title or equity that Borrower may have in and to
the Premises and to vest the same in the purchaser or purchasers at such sale or
sales, and all the acts and doings of said agent and attorney-in-fact are hereby
ratified and confirmed and any recitals in said conveyance or conveyances as to
facts essential to a valid sale shall be binding upon Borrower. The aforesaid
power of sale and agency hereby granted are coupled with an interest and are
irrevocable by death or otherwise, and are granted as cumulative of the other
remedies provided hereby or by law for collection of the Indebtedness and shall
not be exhausted by one exercise thereof but may be exercised until full payment
of all of the Indebtedness. In the event of any sale under this Deed by virtue
of the exercise of the powers herein granted, or pursuant to any order in any
judicial proceeding or otherwise, the Premises may be sold as an entirety or in
separate parcels and in such manner or order as Lender in its sole discretion
may elect, and if Lender so elects, Lender may sell the personal property
covered by this Deed at one or more separate sales in any manner permitted by
the Uniform Commercial Code of the State of Georgia, and one or more exercises
of the powers herein granted shall not extinguish nor exhaust such powers, until
the entire Premises are sold or the Indebtedness is paid in full. If the
Indebtedness is now or hereafter further secured by any chattel mortgages,
pledges, contracts of guaranty, assignments of lease or other security
instruments, Lender may at its option exhaust the remedies granted under any of
said security instruments either concurrently or independently, and in such
order as Lender may determine.
(b) If an Event of Default shall have occurred and be continuing,
Lender may, in addition to and not in abrogation of the rights covered under
subsection (a) of this Section 2.06, either with or without entry or taking
possession as herein provided or otherwise, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to enforce
payment of the Note or the performance of any term, covenant, condition or
agreement of this Deed or any other right under the Loan Documents, and (ii) to
pursue any other remedy available to it, all as Lender shall determine most
effectual for such purposes.
2.07 Purchase by Lender. Upon any foreclosure sale or sales of all or
any portion of the Premises under the power herein granted, Lender may bid and
purchase at such sale or sales and shall be entitled to apply all or any part of
the Indebtedness as a credit to the purchase price.
2.08 Application of Proceeds of Sale. In the event of a foreclosure or
a sale of all or any portion of the Premises under the power herein granted, the
proceeds of said sale shall be applied, in whatever order Lender in its sole
discretion may decide, to the expenses of such sale and of all proceedings in
connection therewith, including reasonable attorney's fees, to insurance
premiums, liens, assessments, taxes and charges including utility charges
advanced by Lender, to costs incurred by Lender in connection with any
environmental surveys and testing of the Premises, to all other advances made by
Lender pursuant to this Deed, to payment of the outstanding principal balance of
the Indebtedness, and to the accrued interest on all of the foregoing; and the
remainder, if any, shall be paid to Borrower, or to the person or entity
lawfully entitled thereto.
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2.09 Borrower as Tenant Holding Over. In the event of any such
foreclosure sale or sales under the power herein granted, Borrower shall be
deemed a tenant holding over and shall forthwith deliver possession to the
purchaser or purchasers at such sale or be summarily dispossessed according to
provisions of law applicable to tenants holding over.
2.10 Waiver of Appraisement, Valuation, Etc. Borrower agrees to the
full extent permitted by law, that in case of a default on the part of Borrower
hereunder and after expiration of any applicable cure period, if any, neither
Borrower nor anyone claiming through or under Borrower shall or will set up,
claim or seek to take advantage of any moratorium, reinstatement, forbearance,
appraisement, valuation, stay, extension, homestead, exemption or redemption
laws now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Deed, or the absolute sale of the Premises, or the delivery
of possession thereof immediately after such sale to the purchaser at such sale,
and Borrower, for itself and all who may at any time claim through or under it,
hereby waives to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets subject to the security
interest of this Deed marshaled upon any foreclosure or sale under the power
herein granted.
2.11 Waiver of Homestead. Borrower hereby waives and renounces all
homestead and exemption rights provided for by the Constitution and the laws of
the United States and of any state, in and to the Premises as against the
collection of the Indebtedness, or any part thereof.
2.12 Leases. Lender, at its option, is authorized to foreclose this
Deed subject to the rights of any tenants of the Premises, and the failure to
make any such tenants parties to any such foreclosure proceedings and to
foreclose their rights will not be, nor be asserted to be by Borrower, a defense
to any proceedings instituted by Lender to collect the Indebtedness.
2.13 Discontinuance of Proceedings. In case Lender shall have proceeded
to enforce any right, power or remedy under this Deed by foreclosure, entry or
otherwise or in the event Lender commences advertising of the intended exercise
of power of sale, entry or otherwise, and such proceeding or advertisement shall
have been withdrawn, discontinued or abandoned for any reason, or shall have
been determined adversely to Lender, then and in every such case (i) Borrower
and Lender shall be restored to their former positions and rights, (ii) all
rights, powers and remedies of Lender shall continue as if no such proceeding
had been taken, (iii) each and every Event of Default declared or occurring
prior or subsequent to such withdrawal, discontinuance or abandonment and not
cured shall be a continuing Event of Default, and (iv) neither this Deed, nor
the Note, nor the Indebtedness, nor any other instrument concerned therewith,
shall be or shall be deemed to have been reinstated or otherwise affected by
such withdrawal, discontinuance or abandonment; and Borrower hereby expressly
waives the benefit of any statute or rule of law now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the above.
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2.14 Remedies Cumulative. No right, power or remedy conferred upon or
reserved to Lender by this Deed is intended to be exclusive of any other right,
power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder or now or hereafter existing at law or in equity or by
statute.
2.15 Waiver.
(a) No delay or omission of Lender or of any holder of the Note to
exercise any right, power or remedy accruing upon any breach or Event of Default
shall exhaust or impair any such right, power or remedy or shall be construed to
be a waiver of any such breach or Event of Default, or acquiescence therein; and
every right, power and remedy given by this Deed to Lender may be exercised from
time to time and as often as may be deemed expedient by Lender. No consent or
waiver, expressed or implied, by Lender to or of any breach or default by
Borrower in the performance of the obligations thereof hereunder shall be deemed
or construed to be a consent or waiver to or of any other breach or default in
the performance of the same or any other obligations of Borrower hereunder.
Failure on the part of Lender to complain of any act or failure to act or to
declare an Event of Default, irrespective of how long such failure continues,
shall not constitute a waiver by Lender of its rights hereunder or impair any
rights, powers or remedies of Lender hereunder, except as expressly provided in
any of the Loan Documents or in any instrument or instruments executed by
Lender. Acceptance by Lender or by any holder of the Note of any sum or payment
from or on behalf of Borrower that is less than the then currently outstanding
amount due under the Note or any of the other Loan Documents, including, but not
limited to, late charges, default interest, additional interest charges, accrued
interest, escrow delinquencies, or payments on principal, or any combination
thereof, shall not be construed to be a waiver of any of Lender's or such
holder's rights, powers or remedies under any of the Loan Documents to collect
or to enforce payment of any such delinquent amount which remains due and owing
after application of such lesser amount to the then current balance as provided
in the Loan Documents.
(b) No act or omission by Lender shall release, discharge, modify,
change or affect the original liability under the Note, this Deed or any other
obligation of Borrower or any subsequent purchaser of the Premises or any part
thereof, or any maker, co-signer, endorser, surety or guarantor, or preclude
Lender from exercising any right, power or privilege herein granted or intended
to be granted in the event of any Event of Default then made or of any
subsequent Event of Default, or alter the security title, security interest or
lien of this Deed except as expressly provided in an instrument or instruments
executed by Lender. Without limiting the generality of the foregoing, Lender may
(i) grant forbearance or an extension of time for the payment of all or any
portion of the Indebtedness; (ii) take other or additional security for the
payment of the Indebtedness; (iii) waive or fail to exercise any right granted
herein or in the Note; (iv) release any part of the Premises from the security
interest or lien of this Deed or otherwise agree with Borrower to change any of
the terms, covenants, conditions or agreements of the Note or this Deed; (v)
consent to the filing of any map, plat or replat affecting the Premises; (vi)
consent to the granting by Borrower of any easement or other right affecting the
Premises; (vii) make or consent to any agreement subordinating the security
title, security interest or lien hereof; or (viii)
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take or omit to take any action whatsoever with respect to the Note, this Deed,
the Premises or any document or instrument evidencing, securing or in any way
relating to the Indebtedness; all without releasing, discharging, modifying,
changing or affecting any such liability, or precluding Lender from exercising
any such right, power or privilege or affecting the security title, security
interest or lien of this Deed except as expressly provided in any of the Loan
Documents or in any instrument or instruments executed by Lender. In the event
of the sale or transfer by operation of law or otherwise of all or any part of
the Premises, Lender, without notice, is hereby authorized and empowered to deal
with any such vendee or transferee with reference to the Premises or the
Indebtedness, or with reference to any of the terms, covenants, conditions or
agreements hereof, as fully and to the same extent as it might deal with the
original parties hereto and without in any way releasing and/or discharging any
liabilities, obligations or undertakings.
2.16 Suits to Protect the Premises. Lender shall have power to
institute and maintain such suits and proceedings as it may deem expedient (i)
to prevent any impairment of the Premises by any acts which may be unlawful or
constitute an Event of Default under this Deed, (ii) to preserve or protect its
interest in the Premises and in the income, rents, issues, profits and revenues
arising therefrom, and (iii) to restrain the enforcement of or compliance with
any legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interest of Lender.
2.17 Proofs of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceedings affecting Borrower, its creditors, its property, or any endorser or
guarantor of the Note, Lender, to the extent permitted by law, shall be entitled
to file such proofs of claim and other documents as may be necessary or
advisable in order to have the claims of Lender allowed in such proceedings for
the entire amount of the Indebtedness at the date of the institution of such
proceedings and for any additional amount which may become due and payable by
Borrower hereunder after such date.
2.18 WAIVER OF BORROWER'S RIGHTS. BY EXECUTION OF THIS DEED, BORROWER
EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF LENDER TO ACCELERATE THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND ANY OTHER INDEBTEDNESS AND THE POWER OF ATTORNEY GIVEN
HEREIN TO LENDER TO SELL THE PREMISES BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY
BORROWER WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH
NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF
THIS DEED; (B) WAIVES ANY AND ALL RIGHTS WHICH BORROWER MAY HAVE UNDER THE
CONSTITUTION OF THE UNITED STATES (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND
FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR
THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE AND
TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY LENDER OF ANY RIGHT OR REMEDY
HEREIN PROVIDED TO LENDER, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY
REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED AND (2) CONCERNING THE
APPLICATION, RIGHTS OR BENEFITS OF
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ANY STATUTE OF LIMITATION OR ANY MORATORIUM, REINSTATEMENT, MARSHALING,
FORBEARANCE, APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR
REDEMPTION LAWS; (C) ACKNOWLEDGES THAT BORROWER HAS READ THIS DEED AND ANY AND
ALL QUESTIONS REGARDING THE LEGAL EFFECT OF THIS DEED AND ITS PROVISIONS HAVE
BEEN EXPLAINED FULLY TO BORROWER AND BORROWER HAS CONSULTED WITH COUNSEL OF
BORROWER'S CHOICE PRIOR TO EXECUTING THIS DEED; AND (D) ACKNOWLEDGES THAT ALL
WAIVERS OF THE AFORESAID RIGHTS OF BORROWER HAVE BEEN MADE KNOWINGLY,
INTENTIONALLY AND WILLINGLY BY BORROWER AS PART OF A BARGAINED FOR LOAN
TRANSACTION AND THAT THIS DEED IS VALID AND ENFORCEABLE BY LENDER AGAINST
BORROWER IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF.
ARTICLE III
3.01 Successors and Assigns. This Deed shall inure to the benefit of
and be binding upon Borrower and Lender and their respective heirs, executors,
legal representatives, successors, successors-in-title and assigns. Whenever a
reference is made in this Deed to Borrower or Lender such reference shall be
deemed to include a reference to the heirs, executors, legal representatives,
successors, successors-in-title and assigns of Borrower and Lender, as the case
may be. The provisions of this Section 3.01 are subject to the restrictions on
transfer contained in Section 1.16 and 1.19 herein.
3.02 Terminology. All personal pronouns used in this Deed, whether used
in the masculine, feminine or neuter gender, shall include all other genders;
the singular shall include the plural, and vice versa. Titles of articles and
sections are for convenience only and neither limit nor amplify the provisions
of this Deed, and all references herein to articles, sections, subsections,
paragraphs or subparagraphs thereof, shall refer to the corresponding articles,
sections, subsections, paragraphs or subparagraphs of this Deed unless specific
reference is made to articles, sections, subsections, paragraphs or
subparagraphs of another document or instrument.
3.03 Severability. If any provisions of this Deed or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Deed and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
3.04 Applicable Law. Borrower acknowledges that this Deed and the other
Loan Documents were negotiated, executed and delivered by Borrower in the State
of Georgia, shall be executed by Lender in the State of Georgia, and shall be
governed by, interpreted and enforced in accordance with the laws of the State
of Georgia.
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3.05 Notices, Demands and Requests. Any and all notices, elections or
demands permitted or required to be made under this Deed shall be in writing,
signed by or on behalf of the party giving such notice, election or demand, and
shall be delivered personally, or sent by overnight commercial courier or by
registered or certified United States mail, postage prepaid, return receipt
requested, to the other party at the address set forth below, or to such other
party and at such other address within the continental United States of America
as may have theretofore been designated in writing. The date of personal
delivery, or one (1) day after deposit with an overnight commercial courier, if
sent by overnight commercial courier, or, if mailed, the date which is three (3)
days after postmark, shall be the effective date of such notice, election or
demand. Rejection or other refusal to accept or inability to deliver because of
a changed address of which no notice has been received by Lender shall
constitute receipt of the notice, election or demand sent. For the purposes of
this Deed:
The address of Borrower is:
Roberts Properties Residential, L.P.
c/o ROBERTS PROPERTIES, INC.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Attn: Charles S. Roberts
With a copy to:
Holt, Ney, Zatcoff & Wasserman
100 Galleria Parkway, N.W. Suite 600
Atlanta, Georgia 30339
Attn: Sanford H. Zatcoff, Esq.
The address of Lender is:
FIRST UNION NATIONAL BANK
Atlanta Real Estate
999 Peachtree Street, N.E.
Ninth Floor
Atlanta, Georgia 30309
Real Estate Portfolio
Mail Code 9068
Attention: Mr. Greg Singleton
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With a copy to:
Smith, Gambrell & Russell
Promenade II, Suite 3100
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Attn: John P. Bailey
3.06 Replacement of Note. Upon receipt of evidence reasonably
satisfactory to Borrower of the loss, theft, destruction or mutilation of the
Note, and in the case of any such loss, theft or destruction, upon delivery of
an indemnity agreement, reasonably satisfactory to Borrower or in the case of
any such mutilation, upon surrender of the Note, Borrower will execute and
deliver, in lieu thereof, a replacement Note, identical in form and substance to
the Note and dated as of the date of the Note and upon such execution and
delivery all references in this Deed to the Note shall be deemed to refer to
such replacement Note.
3.07 Assignment. This Deed is assignable by Lender, and any assignment
hereof by Lender shall operate to vest in the assignee all rights and powers
herein conferred upon and granted to Lender.
3.08 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower under this Deed, the
Note and any and all other instruments now or hereafter evidencing, securing or
otherwise relating to the Indebtedness.
3.09 Consent to Jurisdiction. Borrower hereby (a) submits and consents
to personal jurisdiction in the State of Georgia for the enforcement of this
Deed, and (b) expressly waives any and all personal rights under the law of any
state to object to jurisdiction and/or venue within the State of Georgia for
purposes of litigation to enforce this Deed. In the event that such litigation
is commenced, Borrower agrees that service of process may be made, and personal
jurisdiction obtained, by the serving of a copy of the summons and complaint
upon Borrower's appointed agent for service of process in the state of Georgia,
whose name and address is as follows:
Mr. Charles S. Roberts
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Borrower agrees that it may be validly served with any legal process in
connection with the foregoing by the mailing of a copy thereof by registered or
certified mail to said agent.
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ARTICLE IV
4.01 Scope of Article. The provisions contained in this Article IV are
additional covenants, terms and provisions applicable to Borrower and Lender.
4.02 Notices to Lender. Borrower further covenants and agrees with
Lender that the Borrower will furnish Lender with notice of (i) any change in
ownership of the Premises, (ii) any change in the Borrower's name or identity,
or (iii) the establishment by Borrower of a place of business in Georgia in a
county other than Fulton County, Georgia. Any such notice shall be delivered to
Lender within thirty (30) days of the effective date of any such change or
within thirty (30) days of the establishment of such place of business. Further,
Borrower will promptly execute any and all additional financing statements,
security agreements or other instruments deemed necessary by Lender in order to
prevent any filed Financing Statement filed in connection herewith from becoming
seriously misleading or losing its perfected status.
4.03 Waiver. Borrower hereby represents and warrants to Lender that it
has no defenses, set-off, or counterclaim of any kind or nature whatsoever
against Lender with respect to the Loan Documents, or any action previously
taken or not taken by Lender with respect thereto or with respect to any
security interest, encumbrance, lien, or collateral in connection therewith to
secure the Indebtedness.
4.04 Contest of Taxes. Notwithstanding the provisions of Section 1.02
of this Deed, Borrower may in good faith and at its own expense contest the
amount of any tax bill, assessment or similar charge or the validity thereof by
appropriate legal proceedings which shall operate to prevent the collection
thereof or other realization thereon and the sale or forfeiture of the Premises
or any part thereof to satisfy same; provided that during such contest Borrower
shall, at the option of Lender, provide security satisfactory to Lender,
assuring the discharge of Borrower's obligations hereunder and of any additional
charge, penalty or expense arising from or incurred as a result of such contest;
and provided further, that if at any time payment of any obligation imposed upon
Borrower by Section 1.02 shall become necessary to prevent the delivery of a tax
deed conveying the Premises (or any portion thereof) or other material detriment
to Lender's security because of non-payment, then Borrower shall pay same in
sufficient time to prevent the delivery of such tax deed.
4.05 Notice of Default. Notwithstanding any provisions of the Note,
this Deed or any other document executed in connection with the Indebtedness to
the contrary, Lender agrees that upon the occurrence of an Event of Default
under the provisions of sections 2.01(b), (c), (d), (g) or (h) of this Deed,
prior to accelerating the Indebtedness secured hereby and instituting
nonjudicial foreclosure proceedings, Lender will (i) provide written notice to
Borrower of the occurrence of such Event of Default, and (ii) allow Borrower to
cure such Event of Default at any time within thirty (30) days from the date of
such notice; provided, that in connection with the curing of such Event of
Default, Borrower pays or reimburses Lender for all expenses actually incurred
by Lender as a result of the occurrence of such Event of Default. Borrower
agrees that nothing contained in this Section 4.05 shall be construed to require
Lender (x) to delay in exercising any remedy other than the acceleration of the
Indebtedness and the institution of
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nonjudicial foreclosure proceedings as the result of any Event of Default; (y)
in the event of multiple defaults or Events of Default under one or more of the
documents executed in connection with the Indebtedness, any notice or cure
periods allowed in this Section 4.05 shall run concurrently and not
consecutively. Except as specifically set forth in this Section 4.05, Borrower
shall not be entitled to receive any notice of or time to cure a default or
Event of Default under the provisions of this Deed.
4.06 Attorney's Fees. Any time there is a provision in this Deed or any
of the Loan Documents requiring or referring to the payment by Borrower to
Lender of reasonable attorneys' fees or words of like import, such words shall
mean the payment by Borrower to Lender of reasonable attorneys' fees actually
incurred, based upon the attorneys' normal hourly billing rates and the actual
time expended, and not the statutory attorneys' fees specified in O.C.G.A. ss.
13-1-11.
ARTICLE V
5.1 Covenants, Representations and Warranties. Borrower hereby
unconditionally covenants, warrants and represents to Lender as follows:
(a) Borrower is a duly organized, validly existing limited
partnership, and is in good standing under the laws of the State of Georgia.
Borrower has the power and authority to execute, deliver and perform the
Obligations, to borrow hereunder and execute and perform the Note, the Security
Deed and the other Loan Documents. Borrower's execution, delivery and
performance hereunder shall not constitute a breach of any agreement to which
Borrower is a party.
(b) All financial statements submitted by Borrower to Lender are
and shall be true, correct and complete, do and when submitted shall accurately
present the financial conditions of Borrower.
(c) Borrower is not in default in the performance, observance or
fulfillment of any of its obligations, covenants or conditions contained in any
agreement to which it is a party.
(d) Borrower shall not use or permit the use of the Property for
any illegal activity which would subject the Property to any forfeiture
proceedings under any state or federal laws.
(e) Borrower does not have a defined benefit pension plan under
the Employee Retirement Income Security Act of 1974, as amended from time to
time, the unfunded liabilities of which upon termination could be held to be a
liability of Borrower by the Pension Benefit Guaranty Corporation.
(f) Borrower has not directly or indirectly conveyed, assigned or
otherwise disposed of or transferred (or agreed to do so) any development
rights, air rights or other similar rights, privileges or attributes with
respect to the Property, including those arising under and zoning or land use
ordinance or other law or governmental requirement.
25
<PAGE> 26
(g) Borrower shall notify Lender of (i) any conditions that would
constitute an Event of Default; (ii) any litigation or proceedings that is
brought against Borrower or the Property; and (iii) any material adverse change
in the business, properties or conditions (financial or otherwise) of Borrower.
(h) Borrower shall, within one hundred eighty (180) days after the
date of this Deed, deliver to Lender evidence that (i) the Property is, or will
be, separately assessed for tax purposes, (ii) information as to tax parcel
identification numbers, tax rates and estimated tax values, and (iii) the
identities of the taxing authorities.
(i) Borrower shall pay to Lender a non-refundable commitment fee
in the amount of Seven Thousand Five Hundred and No/100 dollars ($7,500.0),
which was earned upon issuance and acceptance of the Loan Commitment and which
is due and payable whether or not any disbursements are made thereunder or
hereunder.
(j) Borrower has not dealt with any person, firm or corporation
who is or may be entitled to any finder's fee, brokerage commission, loan
commission or other sum in connection with the execution of the Loan Documents,
the consummation of the transactions contemplated hereby or the making of the
Loan by Lender to Borrower, and Borrower does hereby indemnify and agree to hold
Lender harmless from and against any and all loss, liability or expense,
including court costs and reasonable attorneys' fees and expenses, which Lender
may suffer or sustain should such warranty or representation prove inaccurate in
whole or part.
ARTICLE VI
6.1 Arbitration. Upon demand of any party hereto, whether made before
or after institution of any judicial proceeding, any claim or controversy
arising out of, or relating to the Loan Documents between the parties hereto (a
"Dispute") shall be resolved by binding arbitration conducted under and governed
by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association (the "AAA") and the Federal Arbitration
Act. Disputes may include, without limitation, tort claims, counterclaims,
disputes as to whether a matter is subject to arbitration, claims brought as
class actions, or claims arising from documents executed in the future. A
judgment upon the award may be entered in any court having jurisdiction.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
6.2 Special Rules. All arbitration hearing shall be conducted in the
city in which the office of the Bank first stated above is located. A hearing
shall begin within ninety (90) days of demand for arbitration and all hearing
shall be concluded within one hundred twenty (120) days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of sixty (60) days. The
expedited procedures set forth in Rule 51 et. seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. Arbitrators shall be
licensed attorneys selected from the Commercial Financial Dispute Arbitration
Panel of the AAA. The parties do not waive applicable Federal or state
substantive law except as provided herein.
26
<PAGE> 27
6.3 Preservation and Limitation of Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties agree to preserve, without
diminution, certain remedies that any party may exercise before or after an
arbitration proceeding is brought. The parties shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of a receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute. Each party agrees that it
shall not have a remedy of punitive or exemplary damages the other in any
Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially.
6.4 Waiver of Jury Trial. The parties acknowledge that by agreeing to
binding arbitration they have irrevocably waived any right they may have to a
jury trial with regard to a Dispute.
IN WITNESS WHEREOF, Borrower has executed this Deed under seal as of
the day and year first above written.
Signed, sealed and delivered in the Borrower:
presence of:
ROBERTS PROPERTIES RESIDENTIAL,
/s/ Charles R Elliot L.P., a Georgia limited partnership
- ----------------------------------
Official Witness
/s/ Joanne M. Roberts By: Roberts Realty Investors, Inc.,
- ---------------------------------- a Georgia corporation,
Notary Public its sole general partner
[NOTARIAL SEAL] By: /s/
--------------------------------
Name:
------------------------------
Title:
-----------------------------
(CORPORATE SEAL)
27
<PAGE> 28
EXHIBIT A
ALL THAT TRACT of land in Land Lots 230, 231, 234 and 235 of the lst District,
1st Section, Fulton County, Georgia, described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at the intersection of the
northeast right-of-way line of Abbotts Bridge Road (also known as State Route
120) (right-of-way varies) with the southeast right-of-way line of Jones Bridge
Road (right-of-way varies); running thence along the southeast right-of-way line
of Jones Bridge Road, the following courses and distances: (1) North 50 degrees
43 minutes 59 seconds East 330.30 feet to a 1/2-inch rebar found, (2) along the
arc of a curve to the left (which arc is subtended by a chord having a bearing
and distance of North 51 degrees 09 minutes 42 seconds East 140.86 feet and a
radius of 12,180.58 feet) 140.86 feet to a 1/2-inch rebar set, (3) along the arc
of a curve to the left (which arc is subtended by a chord having a bearing and
distance of North 50 degrees 33 minutes 43 seconds East 114.03 feet and a radius
of 12,180.58 feet) 114.03 feet to a 1/2-inch rebar set, (4) North 51 degrees 00
minutes 17 seconds East 454.79 feet to a point, and (5) North 49 degrees 24
minutes 30 seconds East 222.77 feet to a 1/2-inch rebar set and the TRUE POINT
OF BEGINNING; from the TRUE POINT OF BEGINNING as thus establishing, continuing
thence along the southeast right-of-way line of Jones Bridge Road the following
courses and distances: (1) North 49 degrees 24 minutes 30 seconds East 269.76
feet to a point, (2) along the arc of a curve to the right (which arc is
subtended by a chord having a bearing and distance of North 49 degrees 12
minutes 38 seconds East 374.91 feet and a radius of 4217.21 feet) 375.03 feet
to a point, and (3) North 50 degrees 41 minutes 25 seconds East 284.85 feet to a
1/2-inch rebar set; thence leaving said right-of-way line and running along the
southwest boundary of The Forest Unit I, The Forest Unit II and The Forest Unit
IV, the following courses and distances: (1) South 43 degrees 17 minutes 02
seconds East 241.60 feet to a 1/2-inch rebar set, (2) South 31 degrees 12
minutes 02 seconds East 269.95 feet to a 1/2-inch rebar found, (3) South 43
degrees 12 minutes 02 seconds East 169.97 feet to a 1/2-inch rebar set, (4)
South 35 degrees 12 minutes 02 seconds East 199.96 feet to a 1/2 inch rebar
found, (5) South 35 degrees 06 minutes 54 seconds East 125.15 feet to a 1/2-inch
rebar set, (6) South 22 degrees 26 minutes 33 seconds East 160.21 feet to a
1/2-inch rebar set, (7) South 29 degrees 19 minutes 38 seconds East 149.93 feet
to a 1/2-inch rebar found, (8) South 37 degrees 41 minutes 40 seconds East
154.92 feet to a 1/2-inch rebar found, and (9) South 47 degrees 58 minutes 48
seconds East 164.89 feet to a 1/2-inch rebar found; thence along the north
boundary of Abbotts Cove Subdivision and the north boundary of Addison Place -
Phase One, the following courses and distances: (1) South 71 degrees 07 minutes
02 seconds West 134.90 feet to a 1/2-inch rebar set, (2) South 86 degrees 52
minutes 02 seconds West 299.77 feet to a 1/2-inch rebar set, (3) South 79
degrees 37 minutes 02 seconds West 124.91 feet to a 1/2-inch rebar found, (4)
North 73 degrees 51 minutes 50 seconds West 173.42 feet to a point, (5) South 87
degrees 15 minutes 00 seconds West 300.00 feet to a point, (6) South 75 degrees
00 minutes 00 seconds West 190.00 feet to a point in a lake, and (7) North 65
degrees 22 minutes 41 seconds West 207.50 feet to a 1/2-inch rebar found; thence
North 51 degrees 09 minutes 57 seconds East 296.24 feet to a 1/2-inch rebar
found on the land lot line common to said Land Lots 230 and 231; thence along
said common land lot line North 88 degrees 50 minutes 38 seconds West 389.96
feet to a 1/2-inch rebar set; thence leaving said common land lot line, North 13
degrees 49
<PAGE> 29
minutes 17 seconds East 307.12 feet to a 1/2-inch rebar set; thence North 40
degrees 49 minutes 28 seconds West 299.85 feet to the TRUE POINT OF BEGINNING,
said tract containing approximately 29.440 acres as shown on plat of ALTA/ACSM
Land Title Survey for Roberts Properties Residential, L.P., First Union National
Bank and Fidelity National Title Insurance Company of New York, prepared by
Rochester & Associates, Inc., bearing the seal and certification of James C.
Jones, Georgia Registered Land Surveyor No. 2298 dated October 5, 1999.
TOGETHER WITH a non-exclusive right, title and interest in and to the easements
appurtenant to the above-described tract created in that certain Declaration of
Easements by Roberts Properties Residential, L.P. dated October 19, 1999, filed
for record October 21, 1999, and recorded in Deed Book 27850, page 040, Fulton
County, Georgia records.
<PAGE> 30
EXHIBIT B
1. Taxes and assessments for the year 2000 and subsequent years, a lien
not yet due and payable.
2. The following matters which are disclosed on that certain Survey for
Roberts Properties Residential, L.P., Fidelity National Title Insurance
Company and First Union National Bank, prepared by James C. Jones,
Georgia Registered Land Surveyor No. 2298 of Rochester & Associates,
Inc., dated October 5, 1999:
a) 25-foot building lines located along the southerly,
northeasterly and southwesterly boundary lines of subject
property;
b) 50-foot building line located along the northwesterly boundary
line of subject property;
c) portion of lake traverses the southerly boundary line of
subject property;
d) encroachment of wooden foot bridge onto subject property
across the northeasterly boundary line of subject property
which bridge is located southwest of Lot 25, The Forest, Unit
I;
e) encroachment of wooden foot bridge onto subject property
across the northeasterly boundary line of subject property
which bridge is located southwest of Lot 26, The Forest, Unit
I;
f) encroachment of wooden foot bridge onto subject property
across the northeasterly boundary line of subject property
which bridge is located southwest of Lot 65, The Forest, Unit
IV;
g) encroachment of wooden foot bridge onto subject property
across the southerly boundary line of subject property which
bridge is located north of Lot 19, Abbotts Cove Subdivision;
h) encroachment of bridge onto the subject property across the
northeasterly boundary line of subject property which bridge
is located southwest of Lot 29, The Forest, Unit I;
i) encroachment of block retaining wall onto the subject property
across the northeasterly boundary line of subject property
which wall is located southwest of Lot 44, The Forest, Unit
II;
j) encroachment of 6-foot wooden fence onto the subject property
across the northeasterly boundary line of subject property
which fence is located southwest of Lots 42 and 43, The
Forest, Unit II;
k) encroachment of playhouse onto the subject property across the
northeasterly boundary line of subject property which
playhouse is located southwest of Lot 28, The Forest, Unit I;
l) encroachment of treehouse onto the subject property across the
northeasterly boundary line of subject property which
playhouse is located southwest of Lot 28, The Forest, Unit I;
m) encroachment of 5-foot concrete sidewalk onto the subject
property across the northwesterly and northeasterly boundary
lines of subject property;
<PAGE> 31
n) power and telephone line located along the northwesterly
boundary line of subject property.
3. Right-of-Way Easement from R.C. Vaughan to Sawnee Electric Membership
Corporation, dated March 15, 1963, filed for record March 26, 1963, and
recorded in Deed Book 4032, page 244, aforesaid records.
4. Right-of-Way Easement from Benton A. Wood to Sawnee Electric Membership
Corporation, dated June 4, 1964, filed for record June 26, 1964, and
recorded in Deed Book 4256, page 561, aforesaid records.
5. Right-of-Way Easement from Wallace T. Hale to Sawnee Electric
Membership Corporation, dated September 11, 1974, filed for record
October 31, 1974, and recorded in Deed Book 6164, page 173, aforesaid
records.
6. Right-of-Way Easement from Jeffrey R. Novak and Stacy G. Novak to
Sawnee Electric Membership Corporation, dated August 23, 1983, filed
for record September 26, 1983, and recorded in Deed Book 8661, page
201, aforesaid records.
7. Flood Plain Indemnification from Roberts Properties Residential, L.P.
in favor of Fulton County, dated August 18, 1998, filed August 19,
1998, recorded in Deed Book 24983, page 330, aforesaid records.
8. Declaration of Easements by Roberts Properties Residential, L.P., dated
October 19, 1999, recorded in Deed Book 27850, page 040, aforesaid
records.
9. Right-of-Way Easement from Roberts Properties Residential, L.P. to
Sawnee Electric Membership Corporation, dated February 5, 1999, filed
April 26, 1999, recorded in Deed Book 26823, page 85, aforesaid
records. (Affects Appurtenant Easement only).
10. Easement contained in that certain Right-of-Way Deed from Roberts
Properties Residential, L.P. to Fulton County, dated August 18, 1998,
filed September 21, 1998, recorded in Deed Book 25219, page 141,
aforesaid records. (Affects Appurtenant Easement only).
11. Rights of tenants in possession of individual apartment units under
unrecorded leases, as tenants only. (Affects Appurtenant Easement
only).
12. All matters shown on Plat of Survey for Roberts Properties Residential,
L.P., Fidelity National Title Insurance Company and The Prudential
Insurance Company of America by Jordan Jones & Goulding, bearing the
seal and certification of Charles H. Jackson, Georgia Registered
Professional Land Surveyor No. 2351, dated September 23, 1999, last
revised October 19, 1999. (Affects Appurtenant Easement only).
<PAGE> 32
13. Rights of upper and lower riparian owners in and to the waters of
lakes, rivers, creeks or branches crossing or adjoining the subject
property, and the natural flow thereof, free from diminution or
pollution.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 25, 2000 included in this Form 10-K,
into Roberts Realty Investors, Inc.'s previously filed Registration Statement on
Form S-3 (File No. 333-82453).
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,875,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,875,000
<PP&E> 143,850,000
<DEPRECIATION> 21,029,000
<TOTAL-ASSETS> 127,078,000
<CURRENT-LIABILITIES> 92,755,000
<BONDS> 0
0
0
<COMMON> 49,000
<OTHER-SE> 22,261,000
<TOTAL-LIABILITY-AND-EQUITY> 127,078,000
<SALES> 0
<TOTAL-REVENUES> 19,384,000
<CGS> 0
<TOTAL-COSTS> 14,181,000
<OTHER-EXPENSES> 152,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,244,000
<INCOME-PRETAX> 900,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 900,000
<DISCONTINUED> 0
<EXTRAORDINARY> (184,000)
<CHANGES> 0
<NET-INCOME> 716,000
<EPS-BASIC> 0.15
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